The coronavirus has devastated large swathes of the economy and forced millions of Americans to cut non-essential spending and many small businesses to close or go bankrupt. It hurt online loan and insurance consolidation companies Loan tree (TREE – Free report) , with a sharp drop in turnover in the second and third quarters. And TREE stock fell earlier this month when it provided weaker-than-expected guidance.
LendingTree allows consumers to browse multiple offerings from a network of over 500 financial service partners, including mortgages, auto loans, personal loans, business loans, credit cards, insurance, and more. The company had steadily increased its turnover, as part of the mass digitization of financial services. But the economic downturn quickly changed things.
TREE’s second quarter revenue fell 34% and its third quarter sales fell 29% as consumer borrowing remained tight given economic turmoil and uncertainty. Strong growth in its insurance business and weak expansion of its residential segments could not offset a 68% decline in LendingTree’s core consumer division (accounting for 50% of sales in Q3 FY19). ).
The company’s consumer segment includes credit cards, personal loans, small business loans, student loans, car loans, deposit accounts, and more. Investors should note that this unit has climbed 30% sequentially, which is a positive sign. Nonetheless, LendingTree provided disappointing fourth quarter guidance when it released its third quarter results in early November.
Continuing, Zacks estimates that TREE’s fourth quarter sales are expected to fall 18% to $ 210 million, with FY21 first quarter sales expected to fall 20%. Worse than that, the company is expected to go from an adjusted earnings of $ 1.12 per share over the period last year to a loss of $ -0.73 per share.
Overall, LendingTree’s Fiscal 2020 EPS is expected to fall 82% on sales down 19%. Fortunately, the company is expected to rebound in fiscal 2021. However, its totals for the full year are expected to be lower than its 2019 levels, especially at the bottom of the scale.
TREE shares are down more than 20% in the last month and more than 10% in 2020. And it is worth noting that the company announced on November 16 a secondary stock offering, which dropped even more. the course of its action.
The chart above shows how much LendingTree’s broader earnings outlook fell after the release of its third quarter results. The company’s negative reviews activity allows TREE to achieve a Zacks # 5 (strong sell) ranking at this time.
Obviously, a vaccine could help boost the economy and consumer confidence, which would help LendingTree. But with no dividend to help and uncertainty continuing, it’s probably best to stay away from TREE stocks for now.
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