Coronavirus Will Hurt LendingTree's Earnings Into 2021, JPMorgan Says In Downgrade

Lendingtree Inc TREE, an online consumer lending marketplace, issued a second-quarter sales preannouncement Thursday after the close — but an analyst at JPMorgan was unimpressed and is stepping to the sidelines. 

The LendingTree Analyst: Melissa Wedel downgraded LendingTree from Overweight to Neutral and upped the price target from $250 to $280.

The LendingTree Thesis: Strong results in the Home category are the primary reason behind LendingTree's projected outperformance, Wedel said in a Friday downgrade note. 

The online lender now expects second-quarter revenue of $182 million to $186 million, up from its previous guidance range of $160 million to $175 million; and a GAAP net loss of $8 million to $10 million.

"Despite the initial 2Q20 beat, we see a long road ahead in consumer finance and we believe that this cycle will prove to be more protracted than expected," the analyst said. 

The stock gains in the aftermath of the preannouncement are an opportunity to trim positions, given that LendingTree shares have more than doubled off their April lows, she said. 

The impact of COVID-19 is likely to be a headwind to LendingTree's earnings power into 2021, Wedel said. 

In the long-term, the analyst said she believes the company is well-positioned to benefit from its diversified platform, flexible expense structure and opportunistic management.

TREE Price Action: At last check, LendingTree shares were advancing 3.25% to $328. 

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