Lending Tree (TREE): Needham & Company Top Pick for 2016

Needham & Company analyst, Kerry Rice, highlighted Lending Tree (NASDAQ: TREE) as a top pick for 2016 and believes it is on its way to becoming a one-stop shop financial marketplace.

Rice believes TREE will outpace the industry growth due to its improving conversion rate, addition of new lenders, and increasing wallet share from existing lenders. At the same time that the Mortgage Bankers Associate forecasts overall mortgage originations to decline 10% in 2016, Rice estimates TREE’s Mortgage revenue will increase 11% y/y.

The expansion opportunity is through adding new lenders to its network (18 net new adds in 3Q15) and increase spending within its existing network through its new Call Center and Local Introductions products. These new products have enabled TREE support traditional lenders, such as Wells Fargo, to compete more effectively with lenders such as Quicken Loans and LoanDepot. TREE serves ~1.3% of all mortgages in the U.S., up from ~0.7% two years ago, and we believe significant opportunity remains for TREE to capture additional market share.

TREE’s lenders are enjoying lower cost per funded loan, which attracts more lenders to the platform. In 3Q15, total personal loan origination reached $560 million and lender network grew to 24. TREE is expected to continue adding lenders to its platform and garner additional marketing spend from lenders. Equifax estimated annual personal loan origination is a ~70 billion market which would imply that we are in the early innings of this opportunity.

No change to Buy rating or $140 PT.

For an analyst ratings summary and ratings history on Lending Tree click here. For more ratings news on Lending Tree click here.

Shares of Lending Tree closed at $90.04 yesterday.

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