Goldman Sachs Suggests Buying Call Spreads on Discover Financial Services
September 15, 2011 9:59 AM
Goldman Sachs is out with a research note this morning, where it suggests that traders buy call spreads on Discover Financial Services (NYSE: DFS) ahead of earnings.
GS credit card analyst Ryan Nash sees 12% upside to his 12-month price target of $29. The analyst is significantly ahead of the Street for the quarter, yet remains neutral over the longer term, stemming from concerns over competition for loans and associated NIM pressures.
While the past several quarters of “beat and raise” has led to DFS shares rising almost 35% year-to-date, the analyst believes its outlook, given the weakening economic backdrop, will be the key to continued outperformance.
The analysts suggest buying the October $25/29 call spread for $1.75
Discover Financial Services is a direct banking and payment services company. DFS operates as a bank holding and financial holding company.
