Synchrony Financial’s SWOT analysis: stock outlook amid Walmart partnership

Synchrony Financial (NYSE:SYF), a leading consumer financial services company with a market capitalization of $26.74 billion, has been navigating a complex financial landscape characterized by evolving partnerships, credit quality fluctuations, and competitive pressures. The company, currently trading near its 52-week high of $71.88, has demonstrated strong momentum with a 40.78% return over the past year. This comprehensive analysis examines the company’s recent performance, strategic initiatives, and future prospects to provide investors with a clear picture of Synchrony’s position in the market.

According to InvestingPro analysis, SYF currently appears slightly overvalued based on its proprietary Fair Value calculation, suggesting investors should carefully consider entry points.

Financial Performance and Outlook

Synchrony Financial’s fourth quarter of 2024 earnings were in line with analyst expectations, with the company reporting an earnings per share (EPS) of $1.91. The fiscal year 2025 guidance for net revenue and implied EPS aligns with analyst forecasts, suggesting a stable financial trajectory. Currently trading at a P/E ratio of 9.55, SYF maintains a "GOOD" Financial Health Score of 2.98 according to InvestingPro metrics. Notably, 12 analysts have recently revised their earnings estimates upward for the upcoming period, with the next earnings announcement scheduled for July 22, 2025.

Looking ahead, analysts project continued growth in Synchrony’s earnings. Estimates for fiscal year 2025 EPS range from $7.59 to $7.98, with projections for fiscal year 2026 reaching as high as $9.06. This optimistic outlook is supported by expectations of improving credit quality and the potential for stronger growth trends in the latter half of 2025.

Credit Quality and Loan Growth

Synchrony’s credit quality metrics have shown encouraging signs. Delinquency rates (DQs) have performed better than typical seasonal patterns, with improvements noted in year-over-year comparisons. Net charge-offs (NCOs) have also beaten expectations, although they remain slightly above some analyst projections.

Loan growth, however, has been modest. Recent data indicates a deceleration to 0.10% year-over-year growth, down from 0.89% in the previous month. This slowdown in loan expansion could present challenges for revenue growth if the trend persists.

Partnerships and Market Position

A significant development for Synchrony is its renewed partnership with Walmart (NYSE:WMT). The company is set to become the main card issuer for Walmart following Capital One (NYSE:COF)’s termination of its partnership with the retail giant. Analysts view this as a potential top 5 program for Synchrony, with expectations of superior unit economics and enhanced customer acquisition dynamics.

In the competitive landscape of financial services, Synchrony appears to be holding its ground against Buy Now/Pay Later (BNPL) providers. Only 25% of Synchrony’s partners offer non-Synchrony BNPL options at checkout, while the company’s own in-house BNPL platform is gaining traction, present at 20% of surveyed partners.

Future Outlook

Synchrony’s future prospects are closely tied to its ability to capitalize on new partnerships, particularly the Walmart deal, while managing credit quality and driving loan growth. The company’s guidance for 2025 suggests confidence in its strategy, with analysts anticipating lower charge-offs and the potential for stronger performance as consumer confidence improves.

The digital card product through Walmart’s OnePay platform could significantly boost Synchrony’s market position, offering a new avenue for growth. Additionally, the company’s partnership with Atlanticus’ Fortiva card provides a second-look option that broadens its consumer underwriting capabilities and enhances partner value through higher customer conversion rates.

Bear Case

How might slower loan growth impact Synchrony’s financial performance?

The recent deceleration in loan growth to 0.10% year-over-year could pose challenges for Synchrony’s revenue expansion. If this trend continues, it may lead to reduced interest income and potentially impact the company’s ability to meet its earnings projections. Slower loan growth could also indicate underlying weaknesses in consumer demand or increased competition in the lending space, which might require Synchrony to adjust its strategies or potentially accept lower margins to maintain market share.

What risks does the company face from increased competition in the BNPL space?

While Synchrony has shown resilience against BNPL competitors, with only 25% of its partners offering non-Synchrony BNPL options, the rapidly evolving financial technology landscape presents ongoing challenges. As BNPL services gain popularity, particularly among younger consumers, Synchrony may face pressure to innovate and adapt its offerings to remain competitive. The company’s own BNPL platform, while gaining traction, may require significant investment and marketing efforts to compete effectively with specialized BNPL providers that have already established strong brand recognition in this space.

Bull Case

How could the new Walmart partnership drive long-term growth for Synchrony?

The renewed partnership with Walmart presents a significant opportunity for Synchrony to expand its customer base and increase its loan portfolio. As one of the largest retailers in the world, Walmart offers Synchrony access to a vast consumer market. The partnership could become a top 5 program for Synchrony, potentially driving substantial growth in card issuance, transaction volumes, and interest income. Moreover, the collaboration with Walmart’s digital platforms, such as OnePay, could enhance Synchrony’s technological capabilities and appeal to a broader range of consumers, including those who prefer digital financial solutions.

What impact might improving credit quality have on the company’s profitability?

The observed improvements in delinquency rates and better-than-expected net charge-offs suggest that Synchrony’s credit quality is on an upward trajectory. This trend, if sustained, could lead to several positive outcomes for the company’s profitability. Lower delinquency rates typically result in reduced provisions for credit losses, which directly impacts the bottom line. Additionally, improved credit quality may allow Synchrony to extend credit to a wider range of consumers or offer more competitive terms, potentially driving loan growth and interest income. The combination of lower credit costs and potential for expanded lending could significantly boost Synchrony’s profit margins and overall financial performance in the coming years.

SWOT Analysis

Strengths:

• Strong partnerships, including renewed Walmart collaboration
• Improving credit quality metrics
• Resilience against BNPL competition
• Diversified portfolio of financial products

Weaknesses:

• Modest loan growth in recent periods
• Exposure to consumer credit risk
• Dependence on retail partnerships for growth

Opportunities:

• Potential for significant growth through Walmart partnership
• Expansion of in-house BNPL platform
• Digital card product through Walmart’s OnePay
• Potential for stronger growth trends in late 2025

Threats:

• Increasing competition from specialized BNPL providers
• Macroeconomic uncertainty affecting consumer spending
• Regulatory changes in consumer finance sector
• Technological disruption in payment and lending services

Analysts Targets

• Citizens Bank: Market Outperform, $77 PT (July 17th, 2025)
• Citizens Bank: Market Outperform, $68 PT (June 16th, 2025)
• Barclays (LON:BARC): Overweight, $62 PT (June 11th, 2025)
• Truist Securities: Hold, $63 PT (June 3rd, 2025)
• RBC Capital Markets: Sector Perform, $73 PT (January 29th, 2025)
• Barclays: Overweight, $79 PT (January 29th, 2025)

This analysis is based on information available up to July 18, 2025, and reflects the most recent data and analyst perspectives on Synchrony Financial’s stock performance and outlook. For the most comprehensive analysis of SYF, including real-time Fair Value estimates, financial health scores, and expert insights, visit InvestingPro. Our Pro Research Report transforms complex Wall Street data into actionable intelligence, helping you make smarter investment decisions.

InvestingPro: Smarter Decisions, Better Returns

Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on SYF. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore SYF’s full potential at InvestingPro.

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