LendingTree Plunges 16% On Weak Guidance; Street Stays Bullish

Shares in LendingTree (TREE) are plunging 16% in today’s trading after the company’s earnings report and outlook disappointed investors.

Specifically, Q3 Non-GAAP EPS of -$0.26 missed Street expectations by $0.13 while GAAP EPS of -$1.90 also fell short by $0.82. Revenue of $220.3M beat Street estimates by $9.76M, but was still down 29.1% year-over-year. TREE also reported Adjusted EBITDA of $21.7 million.

J.D. Moriarty, CFO, commented: “While demand from our partners remains muted in some of our key Consumer verticals, we’re encouraged by the momentum we’ve seen over the last few months. Our Home segment is solid, and Insurance performed particularly well in the third quarter.”

“The merits of the diversification we’ve put in place have never been more apparent, and we’re using that strength to position the company to excel in 2021 and beyond” he added.

Indeed, trends were strongest in insurance, with revenue up 23.7% year-over-year, while mortgage revenue grew 14% Y/Y thanks to the low rate environment. However, consumer revenue dropped 68% Y/Y as the pandemic constrained consumer credit originations although trends improved from the previous quarter due to better personal loan volumes and a seasonal boost from the student loan business.

Looking forward, TREE provided a below-consensus 4Q20 outlook with revenue of $200-$215M (vs consensus at $215.4M) and EBITDA of $13-$18M million (vs consensus at $27.2M).

Post-print Needham analyst Mayank Tandon reiterated his buy rating on TREE with a $400 price target (37% upside potential).

“Despite the softer near-term outlook, we remain positive on the shares of TREE long-term as we believe that the company is well-positioned to generate strong and consistent revenue, VMM [variable marketing margin], and EBITDA growth as economic pressures stemming from the pandemic start to ease and the lagging consumer segment rebounds” the analyst explained. (See LendingTree stock analysis on TipRanks).

Overall, TREE is down 3% on a year-to-date basis, but the stock boasts a Strong Buy Street consensus with three recent buy ratings. The average analyst price target stands at $380, indicating 30% upside potential lies ahead.