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Why Did LendingTree Drop 9.8% in Thursday’s After-Hours Session?

LendingTree, Inc. (NASDAQ: TREE) has updated its projections for the second quarter of 2022. Following the update, shares of this insurance and mortgage services provider declined 9.8% in Thursday’s extended trading session.

It is worth mentioning here that the shares of TREE gained 5.2% to close at $54.87 in the normal trading session on Thursday.

Inside the Headlines

The company now forecasts revenues to be $259.-$264 million, lower than the previously stated $283-$293 million range.

It has also lowered the variable marketing margin projection to $88-$92 million from the earlier $100-$106 million. Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) are forecast to be within the $26-$29 million range, lower than the $35-$40 million expected earlier.

The company’s CFO, Trent Ziegler, said, “The challenging interest rate environment that progressed through this quarter combined with annual inflation persistently running above 8% has presented additional challenges for many of our mortgage lending and insurance partners.”

The company believes that the rise in mortgage rates has adversely impacted purchase activity and refinance volumes in the Home segment. Meanwhile, higher premiums have made the demand for insurance products volatile from carrier partners in the Insurance segment.

For the Consumer segment, a 40% increase is anticipated in the second quarter.

The 2022 projections have been put under review and will likely be updated next month. In May, the company had forecast revenues of $1,150-$1,190 million, variable marketing margin of $390-$415 million, and adjusted EBITDA of $140-$150 million for 2022.

CEO’s Take

The Chairman and CEO of LendingTree, Doug Lebda, said, “Despite rapid increases in interest rates, rampant consumer price inflation, and looming recession fears presenting persistent headwinds for some of our operating segments, our diversified business model and strong balance sheet allow us to continue to strengthen our competitive position while navigating shorter-term macro-driven challenges.”

Stock Rating

Overall, the stock has a Strong Buy consensus rating based on six Buys and one Hold. TREE’s average price forecast of $137.50 suggests 150.59% upside potential from current levels. Shares of TREE have plummeted 75.7% over the past year.

Insiders are Mostly Bullish

According to TipRanks, Insider Confidence Signal is Positive on TREE, as the company’s insiders have purchased $656.7 thousand worth of TREE stock in the last three months.

Conclusion

The downward revision in the projections for the second quarter is concerning. The changes reflect headwinds for LendingTree in the present tight interest rate environment. However, the remarks of the company’s CEO are encouraging and could help in justifying the stock’s investment appeal.

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Payal Chhawchharia
Payal Chhawchharia has over 16 years of experience in writing research reports and financial blogs on U.S. stocks. Over the years, Payal has covered multiple sectors. She graduated from Calcutta University and has a Masters in Finance from ICFAI University.