Many analysts believe that a recession is approaching or that we are already there. Witness five consecutive weeks of losses for the S&P 500, as well as a drop in gross domestic product of 1.4% in the first quarter. While the prospect of a recession has many investors worried about where to put their money, a Wall Street analyst suggests that one industry is not the place to have your money now.
Wolfe Research released some calls focused on credit card stocks on Thursday. Analyst Bill Carcache thinks a handful of companies in this sector are going through tough times, given that a recession is likely.
Recent headwinds have dampened markets generally, and Wolfe Research thinks the situation will only get worse for these credit card companies. The decrease in spending typically associated with recessions would have an outsized impact on these businesses, and as interest rates rise further, consumers are likely to save their money instead of spending it. As a result, Wolfe reduced his ratings for these four actions.
It is important to remember that no single analyst report should be used as the sole basis for any buy or sell decision.
Synchrony Financial (NYSE: SYF) operates as a consumer financial services company in the United States. It provides credit products, such as credit cards, commercial credit products and consumer installment loans. Wolfe Research downgraded to an underperforming rating from Peer Perform with a price target of $22, implying a 38% decline from the most recent close price of $35.33.
Synchrony stock has a 52-week trading range of $33.22 to $52.49, and it traded near $34 per share on Thursday. The stock is down about 24% since the start of the year.
Wolfe Research has downgraded Discover Financial Services (NYSE:DFS) to a Peer Perform rating from Outperform and has a price target of $97. This implies a 7% decline from the most recent closing price of $104.63. This financial services company operates in two segments: digital banking and payment services. The company not only provides credit card loans, but it offers personal loans, home loans, and student loans, among other services.
The stock was trading around $102, within a 52-week trading range of $99.79 to $135.69. Shares of Discover are down nearly 9% year-to-date.
Capital One Financial Corp. (NYSE: COF) operates as a financial services company through three segments: credit cards, consumer banking and commercial banking. The company is headquartered in Virginia and operates primarily in the United States. Wolfe Research downgraded the stock to Underperform from Peer Perform and has a price target of $86, implying a 28% decline from the most recent close price of $119.59.
The 52-week trading range is $115.04 to $177.95, and shares traded near $117 on Thursday. Shares are down more than 17% since the start of the year.
American Express Co. (NYSE:AXP) is one of the largest credit card companies on the planet. It ranks in the Dow Jones Industrial Average and is a staple of many portfolios, with its consistent returns over the years. The Wolfe Research downgrade changed from Outperform to Peer Perform with a price target of $146, implying an 8% decline from the most recent close price of $159.39.
The shares traded around $156 on Thursday, within a 52-week trading range of $149.89 to $199.55. The stock is down 2% since the start of the year.