4 Reasons Bankrate Could Have Enormous Opportunity Ahead

• The share price of Bankrate Inc RATE has appreciated 45.06 percent over the past three months, touching a high of $14.47 on November 6.
• Joyce Tran of Bank of America Merrill Lynch has upgraded the rating on the company from Underperform to Buy, while raising the price target from $12.50 to $18.00
• Tran expects the stock to outperform going forward, mentioning that there were four ways in which the sentiment and EBITDA multiple could improve.

Analyst Joyce Tran expressed a more constructive view on Bankrate, given the sales of the company’s insurance business has removed an overhang on the stock. In addition, the transition of third party affiliates to issuers’ sites was completed in 3Q.

Tran also expressed optimism regarding Bankrate’s potential for margin expansion, while mentioning that there could be large revenue opportunity in the new personal loans segment.

According to the Bank of America report, there are four avenues that could drive the stock’s outperformance. “First, we expect Bankrate to return to growth in 2016, with the overhangs behind the company,” the report said.

Secondly, the personal loans segment could offer a meaningful market opportunity, while Bankrate is “more aligned with providers” following “the shift of its business to cost-per-closed loan from a cost-per-click model.”

“Third, strong growth from the credit card segment due to website redesign, which should continue into the next few quarters. Fourth, stock support from share repurchases,” Tran explained.

Bankrate reported strong 3Q results, with revenue rising 15 percent year on year, ex-insurance. The company also raised its 2015 revenue guidance above the consensus, while also increasing the EBITDA guidance.

The revenue and EBITDA estimates for 2015 have been raised, as has the revenue growth estimate, ex-insurance, for 2016.