KBW downgraded Synchrony Financial (NYSE:SYF) and Bread Financial (NYSE:BFH) to Market Perform from Outperform because it adopts extra defensive posture based mostly on rising macroeconomic dangers.
Significant deterioration within the financial backdrop is being priced into the cardboard issuers’ valuations, stated analyst Sanjay Sakhrani.
“Recent systemic risks within the banking system have created a more bearish market sentiment, and we believe taking a more defensive posture is warranted,” he stated. “This coupled with incremental data points such as BFH’s monthly data and the fact that the IRS disclosed that tax refunds are lower by 10% relative to last year lead us to be a bit more cautious on the subprime consumer.”
Sakhrani additionally believes the CFPB’s proposed late payment rule applies stress to the personal label area disproportionately.
“While we remain quite confident in these companies’ long-term fundamental stories, we feel investors will gravitate towards the more defensive names – AXP, DFS, COF (in that order) – and this was seen in January-February this year; with defensive names outperforming the others,” he stated.
KBW’s worth goal on Synchrony (SYF) is $32 (9.7% potential upside to its final shut) and on Bread Financial (BFH) is $35 (11.3% potential upside to its final shut).
Wall Street analysts are largely bullish on each Synchrony (SYF) and Bread Financial (BFH). SA Quant charges Synchrony (SYF) Buy, however Bread Financial (BFH) is a Hold.
Meanwhile, Synchrony (SYF) was upgraded to Outperform at Oppenheimer after portfolio evaluation.