BofA raises Bread Financial stock target to $61, maintains Buy rating

On Tuesday, BofA Securities adjusted its outlook on Bread Financial Holdings (NYSE:BFH), increasing the price target from $60.00 to $61.00 while reaffirming a Buy rating on the company’s stock. Currently trading at $55.13 with a P/E ratio of 9.59x, InvestingPro analysis suggests the stock is slightly undervalued, making it an interesting candidate for value investors tracking undervalued opportunities. The revision follows Bread Financial’s April operating metrics, which exhibited strong loss performance with a decrease in losses compared to a typical April, aligning with analysts’ forecasts. Delinquency rates adhered to seasonal trends, and although loan growth was reported to be weak, with a 1.4% year-over-year decline, this was anticipated due to the company’s strategic credit tightening and a self-regulating customer base.

The BofA Securities analyst noted the April results as a positive indication that Bread Financial’s previous measures to tighten credit were effective. This optimism is reflected in the market, with the stock showing an impressive 11.62% return over the past week. In light of these outcomes, the analyst has made slight adjustments to the second quarter of 2025 earnings per share (EPS) estimates, increasing them to $2.12 from $1.97 and the full year to $7.41 from $7.36. InvestingPro data reveals that 7 analysts have revised their earnings upward for the upcoming period, suggesting growing confidence in the company’s outlook.

The new price objective of $61.00 is based on a constant price-to-earnings (PE) multiple of 7.0x applied to the firm’s projected earnings for 2026. The analyst’s commentary underscores the effectiveness of Bread Financial’s credit policies and suggests a stable outlook for the company’s financial performance moving forward.

Bread Financial’s recent operational report reflects a company successfully navigating its credit environment, with deliberate adjustments leading to favorable loss performance metrics. The updated figures provided by BofA Securities offer a slightly more optimistic perspective on the company’s earnings potential, which is now expected to be higher than previously estimated. This outlook is supported by InvestingPro’s overall financial health score of 2.78 (rated as GOOD), with particularly strong scores in cash flow and price momentum metrics. For deeper insights into Bread Financial’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

In other recent news, Bread Financial Holdings reported its first-quarter 2025 earnings, surpassing Wall Street expectations with an earnings per share (EPS) of $2.86, well above the forecasted $2.28. The company’s revenue reached $970 million, exceeding the anticipated $957.48 million. Despite these positive results, Goldman Sachs maintained a Sell rating on Bread Financial, citing concerns about end-of-period loan growth not meeting seasonal expectations. Analysts from Citizens JMP held a Market Perform rating, acknowledging Bread Financial’s stronger-than-expected earnings but expressing caution due to macroeconomic uncertainties, particularly inflationary pressures from tariffs.

Bread Financial also reported a decrease in net loss and delinquency rates, with the net loss rate improving from 8.6% to 7.8% and the delinquency rate dropping from 6.0% to 5.7%. The company’s end-of-period credit card and other loans balance was $17.721 billion as of April 30, 2025, showing a slight decrease from the previous year. Goldman Sachs noted the company’s solid credit results, with delinquencies and net charge-offs performing better than expected. However, the firm remains cautious, maintaining a Sell rating despite the improving credit conditions.

Furthermore, Bread Financial’s management highlighted their improved ability to return capital to shareholders, suggesting potential increases in stock repurchases. The company continues to face competitive challenges from Buy Now, Pay Later services and uncertainty surrounding net interest margins due to a shift toward co-branded card offerings. Overall, these recent developments reflect Bread Financial’s ongoing efforts to navigate a dynamic financial landscape while maintaining a focus on growth and consumer empowerment.

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