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Synchrony Financial Is A 'Clear Leader In An Underappreciated' Market, Buckingham Says In Bullish Initiation

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Synchrony Financial Is A 'Clear Leader In An Underappreciated' Market, Buckingham Says In Bullish Initiation

Synchrony Financial (NYSE: SYF), a consumer financial services company mostly known for offering private label credit cards, is a "clear leader in an underappreciated subsegment of the card market," according to Wall Street's newest bull analyst.

The Analyst

The Buckingham Research Group's Chris Brendler initiated coverage of Synchrony Financial's stock with a Buy rating and $42 price target.

The Thesis

Synchrony Financial is well positioned to continue benefiting from a resurgence in traditional retailers offering their own branded credit cards, Brendler said in the Wednesday initiation note. Traditional retailers have a difficult time keeping up with data-driven e-commerce — and Synchrony's "sophisticated tech-powered marketing expertise" makes it a critical partner for the retail sector at a time when it is needed the most, the analyst said. 

Private label credit card offerings are more exposed to a tough retail environment, but Synchrony is preferred over its peers for three reasons, the analyst said. They are:

  • Superior disclosure, including FICO scores and retail partners.
  • A strong balance sheet with industry-best excess capital and regulatory relief in sight.
  • A higher degree of confidence in the company's guidance and medium-term outlook.

Synchrony Financial's stock is "abnormally inexpensive" at 8.6x consensus 2019 EPS estimates, Brendler said. Buckingham's $42 price target is based on a 9.5x multiple on the analyst's 2019 EPS estimate of $4.43, which is still a discount to the stock's three-year average FY2 multiple of 10.3x.

Price Action

Synchrony shares were up 0.25 percent at $36.77 in Wednesday morning trading. 

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Latest Ratings for SYF

DateFirmActionFromTo
Oct 2020Morgan StanleyMaintainsEqual-Weight
Sep 2020Morgan StanleyMaintainsEqual-Weight
Sep 2020Deutsche BankInitiates Coverage OnBuy

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