LendingTree Clients Apparently Very Happy; Northland Analyst Hikes Target After Latest Conversation

Comments from a mid-tier mortgage lender, which uses Lendingtree Inc TREE for mortgage leads, support the latter’s strong position in the mortgage lending market. Northland Capital Markets’ Mike Grondahl maintained an Outperform rating for the company, while raising the price target from $100 to $120.

Conversation With Mortgage Lender Customer

Analyst Mike Grondahl mentioned the following key points from a conversation with one of LendingTree’s longstanding customers:

• Customers are able to focus on closing mortgages, while being assured that the marketing spend going to LendingTree is being “used efficiently and less expensive than generating leads organically,” Grondahl said.
• The number of mortgage seekers and millennials are increasingly using the Internet for their needs.
• The leads are of a higher quality than competitors, with conversion rates of about 5 percent.
• “This customer conveyed that the mortgage business exceeded expectations by approximately 20% for 1Q16 noting a heavier weighting toward refinance versus purchase which typically runs 70% refi and 30% purchase. It also sounded like February and March volumes were very very strong,” the analyst wrote.

Expectations

The revenue and adj. EBITDA estimates for 2016 and 2017 and been raised to $409M and $470M and to $67M and $80M, respectively.

“Based on the conversation we expect continued strong use of TREE leads and no real competitors were highlighted. We believe the benefits for this mid-tier mortgage company using LendingTree leads will also benefit companies that use TREE leads in personal loans, auto loans and credit cards,” Grondahl commented.