LendingTree (TREE) isn’t one of these sexy “fintech” firms you read much about lately. TREE stock didn’t offer during the current boom of Internet- or app-based service providers, instead going public in 2008 just before the bottom fell out of the stock market.
However, this small-cap stock is a huge winner that is putting other Internet and tech names to shame. And smart investors should pile into TREE stock before it reports earnings next week.
For those unfamiliar, LendingTree operates an online-loan marketplace where consumers can compare loans for cars, mortgages, student loans and more. It’s a great service and an overdue tool for Americans: providing ease, transparency and choice much in the way that Priceline.com (PCLN) did for the travel industry.
LendingTree’s mortgage business has been a big driver of the stock since home lending tends to go in boom-and-bust cycles. However, TREE stock has made great strides lately thanks to diversification in its overall loan portfolio. And it has currently grew its non‐mortgage operations business revenue from about 11% in 2013 to 27% as of LendingTree earnings in Q1.
Personal loans, including credit card refinancing, are a particular area of strength. And the CEO of TREE called it “massively underpenetrated” in last quarter’s earnings call.
There is risk that a rising rate environment could be a letdown to mortgage lending, particularly the refinance business. However, the Fed has held off on a rate hike thus far and there’s no reason to expect that to change anytime in the near future. Besides, rates ticked down modestly from March to April so Q2 numbers should remain unaffected.
TREE stock is a momentum darling, up over 200% in the last year and up roughly 10-fold since its 2009 lows. This is a company that is forging ahead with a new financial model for the digital age that should continue to connect with consumers and investors alike.
LendingTree reports on Aug. 3; and after a huge earnings surprise last quarter, there’s are a lot of reasons to be bullish heading into this report.
I say buy TREE stock with confidence.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.
