Bankrate: Recent Decline on Turmoil in Subprime Mortgage Market

Tim Boyd, an analyst at Caris & Co., yesterday raised his rating on lending information Web site Bankrate (RATE) to Above Average from Average, citing a recent 15% pullback of the shares. Boyd notes that the sell-off reflected the overall market decline and concerns about the impact on advertising from the turmoil in the subprime mortgage lending market.

“We attribute much of the recent decline in RATE shares to the turmoil in the subprime mortgage lending market,” he says.

In recent weeks several major subprime lenders have announced a large increase in non-performing loans, which will lead to an increase in the amount of money that must be set aside to cover defaults and, ultimately, a decrease in advertising/marketing spend. RATE would, of course, be hurt by this – if it had a meaningful amount of exposure to the subprime market. But it does not. Visitors to Bankrate.com have an average credit score that is well above the 650 'subprime threshold' (we believe it is roughly 700) and it does not target any subprime lenders for its display ad inventory.

He says total exposure to subprime lenders is “negligible.”

Boyd keeps his $44 price target on the stock.

Yesterday, Bankrate was up $1.20 at $38.70.

RATE 1-yr chart