On Wednesday, Susquehanna maintained a Neutral rating on Lending Tree (NASDAQ:TREE) but raised the price target to $27 from $15, following the company's fourth-quarter results that surpassed expectations. The performance was primarily driven by the robustness of the Insurance segment, which showed a quarter-over-quarter growth of 9.4%.
Despite year-over-year declines across all three business segments—Home, Consumer, and Insurance—the Insurance segment's growth was attributed to increased marketing expenditures from insurance carrier partners and a surge in consumer demand for insurance products.
Lending Tree's management has provided guidance for the first quarter of 2024 and the full year, which may be on the conservative side. The projections do not account for any potential interest rate cuts in 2024 and anticipate only the Insurance segment to see a significant improvement, with the Home segment expected to remain stable and the Consumer segment likely to experience a decline compared to the previous year.
The company's ongoing efforts to repurchase their 2025 convertible notes, with $284 million still outstanding, reflect a proactive approach to managing their debt. Susquehanna's revised estimates have led to an increased price target based on a 7.7x multiple of the 2025 estimates, a change from the previous 9.1x EV/EBITDA multiple based on 2024 estimates.
While the analyst has a positive outlook on Lending Tree's recent performance and adjustments to estimates, the Neutral rating remains due to some weak demand in the Home and Consumer segments. The firm notes that any reductions in interest rates could potentially provide a boost to Lending Tree's business. The detailed notes from the callback, which contain the substance of the analyst's comments, are available upon request.
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