LendingTree: Solid Q2 Growth And Consumer Credit Tailwinds

| About: LendingTree, Inc. (TREE)

Summary

LendingTree stands to benefit substantially from the improving housing and consumer credit market.

Home equity requests are up by 140% year-over-year.

Mortgage business grew by 51% year-over year to $56 million.

Non-mortgage product revenue increased by 114% year-over-year.

LendingTree is an excellent vehicle for exposure to the growth of the entire personal finance marketing industry.

LendingTree (NASDAQ:TREE) reported its second quarter earnings last week, beating analyst estimates on the bottom line by $0.20 with $0.92 EPS. However, the company missed analyst estimates on the top line with revenue of $94.3 million in the quarter.

Over the last year shares of the company have performed very well. Over the last twelve months shares of LendingTree have appreciated by a whopping 20.3%. And, since the start of 2016 shares of the company have traded higher by 10.6%.

I've been stalking LendingTree for the last few months and I am very interested the long term thesis. I believe that that personal finance marketing industry is primed for growth in the decades ahead. And, LendingTree is the leader in the personal finance lead generation industry. As a leader in the industry, LendingTree stands to benefit substantially from the improving housing and consumer credit market. Specifically, I believe LendingTree is in a great position to grow its mortgage, personal loan, and credit card business.

Since hitting a bottom in 2012, home prices are up by about 38%, and are less than 10% below all-time highs set in 2007. Rising home prices is a good thing for LendingTree. On the company's second quarter conference call, Chief Executive Officer Doug Lebda reported that home equity requests are up by 140% year-over-year. In addition, revenue from the company's mortgage business grew by 51% year-over year to $56 million.

According to Bloomberg, the national average 30-year fixed home mortgage rate in the U.S. fell to 3.36%, equaling a record low that was set in late 2012. Home buyers and homeowners looking to refinance are benefiting from the drop in U.S. Treasury yields. And, according to the S&P CoreLogic Case-Shiller Indices national home prices increased by 5% annually in May. Rising home prices and strong buyer demand is good for the company.

Even more exciting, the company's non-mortgage product revenue increased by 114% year-over-year. LendingTree has positioned itself to benefit from the growing personal loan market. The personal loan industry is growing as more lenders enter the industry and borrowers are looking for credit. According to TransUnion, 27.34 million people held secured and unsecured loan balanced at the end of the 3rd quarter of 2015, up 18% from 22.5 million people in the 3rd quarter of 2013.

In June, the Wall Street Journal reported that the popular personal loan company, Prosper Marketplace, put its relationship with LendingTree on hold. Temporary funding issues has hurt some personal loan companies, in turn weighing on LendingTree. But in the second quarter the company was positive by announcing that the company is working with six new lenders, including a top online lender in a major U.S. bank. The company went onto say that its lending partners are increasing advertising budgets. Lebda was especially positive by saying:

Given the improving fundamentals and the strong lender pipeline, we're more confident than ever in the stability, profitability, and growth opportunity of our personal loans business moving forward.

LendingTree's credit card business was slow in the second quarter due to seasonality. That said, the credit card industry as a whole is headed in the right direction. According to CNBC, the number of credit card accounts in the U.S. is rapidly rising. In the first quarter of 2016, credit card originations increased to 16.52 million, up 14.5% on a year over year basis. Total credit card balances increased to $644 billion in the first quarter of 2016, up 6.4% on a year over year basis.

More consumers are looking for new credit cards, and credit card issuers are opening the doors to more customers.

The entire personal finance marketing industry stands to benefit from improving trends in the housing and consumer credit markets. Investing in the personal finance marketing industry is difficult. LendingTree is an excellent vehicle for exposure to the growth of the entire personal finance marketing industry. LendingTree should continue to make gains in the mortgage, personal loan, and credit card industries.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.