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Keefe, Bruyette & Woods (KBW) has maintained its Outperform rating and $232.00 price target for Capital One Financial (NYSE:COF). The financial services company’s stock has recently experienced a decline following a competitor’s report suggesting potential antitrust issues from the Department of Justice (DOJ) regarding its deal with Discover Financial Services (NYSE:DFS).
Sanjay Sakhrani of KBW addressed the concerns raised by the report, stating that the apprehensions regarding a high concentration of subprime lending as a basis for antitrust scrutiny appear to be exaggerated. According to Sakhrani, no official statement from the DOJ has been released to support these claims. Despite recent volatility, Capital One has demonstrated strong fundamentals, maintaining dividend payments for 31 consecutive years.
Furthermore, Sakhrani emphasized that even if the DOJ were to advise against the deal, the Federal Reserve and the Office of the Comptroller of the Currency (OCC) have the authority to approve the transaction. He believes that the market’s response to the unconfirmed report, which saw Capital One’s shares fall approximately 4% and Discover Financial Services’ shares drop around 8%, is an overreaction.
The analyst also highlighted that the current situation underscores his view on the potential risks if the deal does not go through. Despite today’s downturn in stock prices, Sakhrani continues to prefer Capital One over Discover Financial Services, citing the former’s relatively better stock performance as evidence of its resilience in a no-deal scenario.
In other recent news, Capital One Financial has been in the spotlight due to several key developments. The company is facing potential antitrust concerns over its proposed $35 billion acquisition of Discover Financial Services. According to a Capitol Forum report, the Department of Justice staff believes the deal could negatively impact the subprime sector. Despite these concerns, Capital One remains optimistic about gaining approval, asserting that the merger complies with legal requirements. In a separate update, Capital One released its February 2025 charge-off and delinquency data, although specific figures were not disclosed. These metrics are crucial for investors to assess the company’s credit portfolio health. Additionally, Evercore ISI and Baird have both upgraded Capital One’s stock rating to Outperform, with a price target of $200. Baird analysts are optimistic about Capital One’s ability to generate strong earnings despite economic challenges. These recent developments have captured the attention of investors and market analysts alike.
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