Thursday, August 27, 2009

They're right to be worried at Lending Tree (TREE)

AlphaNinja - Lending Tree (TREE) shares are down 7% this morning, after the company said it is suing a technology provider who has shared data with Google. The company is right to be concerned if Google is entering the lending game.

"A LendingTree lawsuit against a separate technology provider claims that it has learned Google plans to launch such a service later this month or in early September. The lawsuit claims that LendingTree has received screen shots -- pictures of a computer screen -- showing a trial version of Google's service that indicate Google will give customers loan offers and contact information for lenders.

Google Inc. issued a written statement Wednesday saying it is "working on a small ad unit test" involving a limited number of mortgage-related searches.

"We have a number of experiments going on at any one time, but we don't speculate on future product development," the company said.

We'll what kind of economic "moat" (competitive advantage that can't be easily replicated) Lending Tree has. While the company is quite profitable, that only leads others to the space, reducing profits and increasing competition.

Stifel Nicolaus downgraded TREE shares to SELL today, based on the news. A look at the chart shows a long way to fall....

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