Needham cuts Lending Tree target to $65, maintains Buy rating

On Thursday, Needham analyst Mayank Tandon adjusted the price target for Lending Tree stock (NASDAQ:TREE), currently trading at $40.27, dropping it to $65 from the previous $65 while sustaining a Buy rating on the shares. According to InvestingPro data, analyst consensus remains strongly bullish, with price targets ranging from $60 to $78. This revision follows Lending Tree's fourth-quarter earnings report, which exceeded expectations in terms of revenue and EBITDA, with all three of its business segments contributing to this positive outcome. The company's trailing twelve-month revenue stands at $773 million, with an impressive 95.5% gross margin. The increased demand for Home Equity Lines of Credit (HELOC), personal and small business lending, and a rebound in lead generation for insurance carriers were key factors in the company's performance.

Lending Tree has also provided an optimistic forecast for both the first quarter and the full fiscal year of 2025, anticipating double-digit growth across consumer, home, and insurance segments. The analyst highlighted the success of the company's diversification strategies and the improving demand environment, suggesting potential for the initial outlook to be exceeded.

The firm's reiteration of the Buy rating reflects confidence in Lending Tree's revenue trends and EBITDA margin outlook. Despite the lowered price target, the analyst noted the stock's valuation remains attractive, with a forecasted fiscal year 2026 enterprise value to EBITDA ratio of approximately 7 times. InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which covers over 1,400 US stocks. The reduction in the price target is attributed to the broader decline in valuations for lead generation stocks.

In other recent news, LendingTree reported robust fourth-quarter earnings, significantly exceeding expectations with an earnings per share (EPS) of $1.16 against a forecasted loss of $0.14. The company's revenue also surpassed projections, reaching $261.5 million compared to the anticipated $230.9 million. Truist Securities responded to these positive results by raising LendingTree's stock price target from $70 to $72, maintaining a Buy rating. Meanwhile, Keefe, Bruyette & Woods adjusted their price target from $73 to $66, but still upheld an Outperform rating, noting LendingTree's strong EBITDA performance and segment growth.

LendingTree's management has expressed confidence in continued momentum, projecting double-digit revenue growth into 2025. The company anticipates improvements in operating margins and plans to reduce its net leverage ratio, which would aid in retiring debt due later this year. Analysts from Truist Securities find the current valuation levels compelling due to LendingTree's diversified revenue streams and solid business trajectory.

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The company has reached a significant turning point, achieving double-digit revenue growth across its Home, Consumer, and Insurance segments for the first time since 2021. This growth is attributed to strong execution despite high-interest rates. LendingTree's strategic focus on areas like Insurance has allowed it to navigate challenges and maintain resilience in a fluctuating economic environment.

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