Shares of Synchrony Financial are under pressure from macro concerns, but Piper Sandler upgraded the credit card stock to overweight, arguing that investors are discounting positive factors.
On Wednesday, analyst Kevin Barker, who had a neutral rating earlier, said fears of a recession, rising financing costs and increased competition are weighing on the stock. But positive trends such as the company’s strong credit performance and accelerating loan growth are clearly not factoring in, he said.
Synchrony (ticker: SYF) has traded down 26% over the past three months, underperforming peer card lenders like
Discover financial services
Capital One Financial
(COF), Baker said in a note. Capital One is down 13% and Discover fell 9%, according to the analyst.
Still, Synchrony’s credit performance has been better than the other two companies in the short term. Its 30-plus-day delinquency growth rate continues to decline year-over-year and has shown no significant upward movement, he added.
“In our view, this reflects that SYF’s portfolio may be stronger than some of its peers after tightening underwriting standards when the pandemic emerged,” Barker said.
He added that while many of Synchrony’s competitors have told investors to expect double-digit loan growth in 2022, Synchrony’s forecast for high-single-digit growth has been conservative. “The company has already said it’s seeing an acceleration in purchasing volume for teens,” he said.
Management’s conservative stance means to Baker that revenue could be higher than expected. He expects $16.02 billion in revenue this year.
Barker has a target of $49 on the company’s stock. Synchrony rose 2% to $35.90 on Wednesday even as the
Wells Fargo analyst Donald Fandetti, on the other hand, lowered his price target on the stock to $45 from $52 on Wednesday, given economic uncertainties, among other reasons. But he maintained his overweight rating.
More than 15 analysts tracked by FactSet have bullish ratings on the stock, while six have it in Hold. Synchrony is expected to release its first quarter results on April 18.
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