Peck: LendingTree Worth $150

• Lendingtree Inc TREE shares have been volatile over the last three months, and have gained 3 percent since August 10.
• SunTrust Robinson Humphrey’s Robert S. Peck initiated coverage of the company with a Buy rating and a price target of $150.
• The company targets a large market opportunity and has a strong brand, a disciplined operating model and robust financials, Peck mentioned.

LendingTree is addressing the market for consumer loans, which is large, valued at more than $12 trillion. Moreover, this market is dominated by mortgages, which account for nearly 70 percent of consumer debt.

“Assuming a cost per funded loan of ~150 bps, we estimate the market for loan lead generation at ~$35B. With only 5% currently done online, this creates a long run way for online lending market places, like LendingTree,” analyst Robert Peck said.

Within the mortgage segment, LendingTree has added features like the Rate Table, mobile forms, local loan officer, and a call center to enhance user experience. Outside this segment, the company has added new loan types to expand its TAM and diversify revenue, including credit cards, personal loans, student loans, and small business loans, Peck noted.

The analyst projected ~47 percent revenue growth in 2015, up from ~20 percent in 2014. While mortgage related revenue contributes about 60 percent of revenues, non-mortgage revenues have been growing by more than 150 percent.

“The company optimizes marketing to drive variable marketing margins ~40%, and Adj. EBITDA in the mid teens,” Peck wrote. He added that LendingTree’s stock trades at a discount to peers, and provides a “budding opportunity for investors.”