JPMorgan: Time To Buy Discover

In a report published Wednesday, JPMorgan analysts upgraded the rating on

from Neutral to Overweight, while maintaining the price target at $65. Discover's share price has declined 10.8 percent year-to-date. With this, the stock is now undervalued. During the first quarter, the share price came under pressure due to concerns surrounding rising provision and marketing expenses as well as potential incremental EMV card technology costs in 2015. "We believe DFS is inexpensive based on our assumptions, which already factor in an increasing NCO rate on a growing loan portfolio, increasing opex, and a discounted forward multiple," the analysts wrote. The EPS estimates for 2015 and 2016 have been raised modestly from $5.37 to $5.38 and from $5.66 to $5.68, respectively. "Our valuation methodology focuses on NTM earnings multiples. Consequently, our Dec 2015 price target references our 2016 EPS forecast. We maintain our Dec 2015 price target of $65 based on a 11.5x multiple of our 2016 EPS estimate of $5.68," the analysts added.