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Tuesday, Truist Securities began coverage of Synchrony Financial (NYSE:SYF), a leader in private-label credit cards, assigning a Hold rating and setting a price target of $72.00.
Truist Securities cited several reasons for the neutral stance, including the diminishing returns from late fee mitigation efforts, the stock's significant gains in 2024, and potential delays in reconciling positive loan growth with negative spend growth.
Synchrony Financial, with a market capitalization of $25 billion, is recognized as the largest provider of private-label credit cards in the United States. The company's history extends nearly a century back to its origins as GE's captive credit arm for the purchase of GE appliances. In 2014, Synchrony separated from GE and has since operated across five sales platforms: Home & Auto, Digital, Diversified & Value, Health & Wellness, and Lifestyle.
The analyst at Truist Securities noted that while there are several tailwinds for Synchrony, there are also factors that warrant caution. One of the main concerns is that the upside potential from reducing late fees, which has been an ongoing process, may be limited. Additionally, Synchrony's stock performance was among the best within Truist's coverage universe in 2024, with its next twelve months (NTM) price-to-earnings (P/E) ratio currently at 10.2x. This is nearly two points higher than its long-term average of 8.7x.
The analyst also pointed out the challenge Synchrony may face in bridging the gap between loan growth, which has been positive, and spend growth, which has been negative. The expectation on the street is that this reconciliation will happen swiftly, but the analyst suggests it may take longer than anticipated.
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