E-Loan: Mortgaging Its Future

For some time, the financial markets have had an obsession with interest
uncertainties. Yet, key economic indicators show that inflation is under
control.

Yesterday, there was more evidence of this, when the government reported
that workers’ productivity soared 5 percent (on an annual basis). What’s more,
labor costs fell. Both stocks and bonds rallied on the news (with Nasdaq
hitting an all-time high).

Despite this, there are still some interest-rate sensitive Net stocks that
are sunk in the doldrums. One is E-Loan
(EELN).
Currently, the stock is trading for $12-23/64 (the market capitalization
is $515 million). The 52-week high was $74-3/8.

Originally, the company was a pure online mortgage loan company. However,
now the company has expanded its product line to include car loans, small
business loans and credit cards. In fact, 32 percent of sales came from car
loans in the prior quarter. This was accomplished with the acquisition of
CarFinance.com.

The E-Loan.com site makes it easy to compare rates, apply for and get the
money you need to finance your dreams. What’s more, the site also monitors
your loan (for example, it will notify you if it makes sense to refinance).

With its first mover advantage, the company has been quick to partner with
leading companies. They include such big names as Car & Driver Online,
Yahoo!, E*Trade, Wingspanbank.com and Kelley Blue Book.

Actually, in the past month, the E-Loan has struck two critical deals. One
was with the mega real estate agency RE/MAX International. E-Loan will help
create a lending center for the RE/MAX website. Next, E-Loan signed a deal
with H & R Block to be the Mortgage Center on the hrblock.com Web site.

Moreover, E-Loan has partnered with companies to provide services in Japan,
Australia, the United Kingdom and Europe.

Recently, the company reported its financials. In the fourth quarter, the
company generated $7.7 million in revenues, up from $3 million in the same
period a year ago. The sequential growth rate was 53 percent. In all, the
company had $22.1 million in revenues in 1999.

The losses were losses: $11.8 million, up from $3.9 million a year ago.

But somehow, the markets see E-Trade as a niche player, catering to mortgage
lending. Yet, the company is aggressively expanding its customer base into
new loan categories. Basically, E-Loan will become a one-stop shop for
loans. Once this hits critical mass, so should the stock price.