Citi Goes Shopping For Credit Card Initiations

Citi initiated coverage of four U.S. credit card companies Thursday, two of which were given bullish ratings and two given neutral ratings.

The Analyst

Citi's Jill Shea initiated coverage of the following companies:

• Capital One Financial Corp. COF initiated at Buy, $115 price target.
• American Express Company AXP initiated at Buy, $110 price target.
• Discover Financial Services DFS initiated at Neutral, $78 price target.
• Synchrony Financial SYF initiated at Neutral, $37 price target.

The Thesis

The bullish case for Capital One is based on significant tech investments, tangible benefits from a switch to the cloud and expectations for revenues to grow faster than expenses as its technology infrastructure becomes highly scalable.

The bullish case for American Express is based on strong billings momentum should drive EPS growth, credit quality "seasoning" and management's provision guidance looking reasonable.

On the other hand, a neutral stance on Discover Financial is based on expectations for a tick-up in back book losses, which implies a higher run-rate provision compared to the Street's expectations.

Related Links:

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