Credit Concerns Spark Downgrades! American Express, Capital One, Synchrony Financial Hit By Credit Quality Doubts Analyst
Portfolio Pulse from Nabaparna Bhattacharya
BMO Capital Markets analyst James Fotheringham downgraded American Express (AXP), Capital One (COF), and Synchrony Financial (SYF) due to credit quality concerns, among other issues. AXP was downgraded to Underperform with a price target of $157, implying a -17% downside. COF was downgraded to Market Perform with a $124 target, a 6% downside, partly due to the potential impact of a lawsuit from Walmart (WMT). SYF was also downgraded to Market Perform with a $40 target, with potential earnings impact from CFPB's late fee rule. Citigroup (C) was downgraded to Market Perform with a $57 target, and OneMain Holdings (OMF) maintained at Market Perform with a $50 target.
January 10, 2024 | 8:47 pm
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NEUTRAL IMPACT
OneMain Holdings maintained at Market Perform with a $50 target, as loan growth resumes and credit trends moderate.
OMF's stable outlook with resumed loan growth and moderated credit trends does not indicate a significant short-term impact on the stock price.
CONFIDENCE 70
IMPORTANCE 60
RELEVANCE 70
NEUTRAL IMPACT
Walmart is suing Capital One to exit its partnership agreement, potentially impacting COF's revenue growth.
Walmart's lawsuit is primarily a concern for COF, and while it may indirectly affect WMT's operations, the direct short-term impact on WMT's stock is likely to be limited.
CONFIDENCE 65
IMPORTANCE 50
RELEVANCE 50
NEGATIVE IMPACT
American Express downgraded to Underperform with a price target of $157, indicating a -17% downside due to credit quality concerns and other factors.
The downgrade by BMO due to credit quality and other financial pressures suggests a negative short-term outlook for AXP's stock price.
CONFIDENCE 80
IMPORTANCE 85
RELEVANCE 90
NEGATIVE IMPACT
Citigroup downgraded to Market Perform with a price target of $57, expected to underperform during the forecasted credit cycle from 4Q23 to 4Q25.
The downgrade is based on the expectation that C shares will underperform during periods of risk-off sentiment, suggesting a cautious short-term outlook.
CONFIDENCE 70
IMPORTANCE 75
RELEVANCE 80
NEGATIVE IMPACT
Capital One downgraded to Market Perform with a price target of $124, a 6% potential downside, amid credit quality concerns and a lawsuit from Walmart.
The downgrade and the ongoing lawsuit with Walmart, which could force COF to transfer a significant loan portfolio, are likely to negatively impact COF's stock in the short term.
CONFIDENCE 75
IMPORTANCE 80
RELEVANCE 85
NEGATIVE IMPACT
Synchrony Financial downgraded to Market Perform with a $40 target due to credit quality issues and potential impact from CFPB's late fee rule.
The downgrade reflects concerns over credit quality and regulatory pressure, which could significantly impact SYF's earnings and stock price in the short term.
CONFIDENCE 75
IMPORTANCE 80
RELEVANCE 85