LendingTree's Growth in Insurance and SEM Advertising Positions for Multi-Year Cycle, Says Analyst

Keefe, Bruyette & Woods analyst Ryan Tomasello upgraded LendingTree, Inc. TREE from Market Perform to Outperform, raising the forecast to $45 from $24.

Per Tomasello, the 2024 earnings recovery for LendingTree is led by a rebound in the company’s insurance segment, where 2024 guidance could be conservative.

Going ahead, the analyst forecasts that insurance segment revenue/profit will surpass prior peaks this year (roughly 30-40% Y/Y growth) and continue double-digit growth in 2025.

The analyst highlighted an “increased conviction” in the company’s ability to efficiently address its convert maturity in 1H24. 

Longer-term, Tomasello sees the company addressing certain areas, including regaining market share in the consumer segment and refining its purchase mortgage offering.

However, the analyst projects these items to take a back seat over the near-term as investors focus on the broader earnings recovery and balance sheet optimization.

As a leader in the largest SEM advertising category, the analyst highlighted that the company is well-positioned on a relatively competitive basis to capitalize on what could be a multi-year growth cycle. 

However, the uncertainty around the firm’s ability to address its July 2025 convert maturity has been the primary overhang on the stock over the last year.

According to Tomasello, avoiding equity-linked dilution is a top priority for management. 

With $112 million of cash and $284 million of the convert remaining, the analyst sees the firm has a viable path to addressing the maturity via a combination of additional repurchases at a discount and/or refinancing the remaining portion while keeping net leverage <4x.

Tomasello raised FY24 earnings per share estimate to $2.04 from $1.56. 

Price Action: TREE shares are trending higher by 8.4% to $35.37 on the last check Wednesday.