Loop Capital Says Buy Bankrate As Credit Card Business Picks Up

Bankrate Inc RATE delivered better-than-expected results for the third quarter and offered upbeat outlook for the rest of the year. Following this, the stock gained about 15 percent, as the brokerage house started reviewing the target prices and rating.

Upgrade To Buy -Loop Capital

For its part, Loop Capital upgraded Bankrate shares from Hold to a Buy rating and lifted the target price from $9 to $10, implying about a 20 percent upside potential. The firm thinks that most of the growth came from credit card businesses and sees enough room to extend the gains in the fourth quarter too.

Analyst Blake Harper pointed out that credit cards accounted for 75 percent of revenues and 86 percent of EBITDA in the third quarter. He believes the company could continue to witness robust demand for leads from the big issuers. One of the reasons the company gained in the third quarter was the bigger campaigns.

The brokerage noted that Bankrate faced headwinds from the fourth quarter of 2015 through the March quarter, due to changes on Google (parent company, Alphabet Inc. GOOGGOOGL) search results for credit cards. In a research note, the firm stated, “Credit card revenues declined sequentially in Q415and Q115, but have rebounded as the company has stepped up its paid marketing efforts, expanded its social media presence and benefited in Q3 from a full quarter of integration of NextAdvisor and its content marketing channel.”

Looking Ahead

Loop Capital sees Bankrate continuing to gain from automated dynamic pricing, as customer inquiry witnessed a growth of 31 percent. Its mortgage unit recorded its fifth consecutive quarter of growth with the latest one recording 35 percent uptick.

At last check, Bankrate was up 18.75 percent at $8.55.