Synchrony Financial’s SWOT analysis: credit trends, partnerships boost stock outlook

Synchrony Financial (NYSE:SYF), a leading consumer financial services company with a market capitalization of $27.1 billion, has been navigating a complex economic landscape with a mix of challenges and opportunities. Recent analyst reports highlight the company’s improving credit quality, strategic partnerships, and potential for earnings growth, while also noting concerns about near-term loan growth and macroeconomic uncertainties. According to InvestingPro data, the stock has demonstrated strong momentum, delivering a remarkable 47% return over the past year.

Financial Performance and Outlook

Synchrony’s fourth quarter of 2024 earnings were in line with analyst expectations, setting a stable foundation for 2025. The company’s fiscal year 2025 guidance for net revenue and implied earnings per share (EPS) aligns with consensus forecasts, suggesting a cautiously optimistic outlook. Trading at a P/E ratio of 8.77, which InvestingPro analysis indicates is low relative to near-term earnings growth, Synchrony has attracted positive attention from analysts, with 10 recently revising their earnings estimates upward.

Credit trends have been a bright spot for Synchrony. Delinquency rates and net charge-offs have performed better than expected, showing improvement year-over-year and better-than-normal changes month-over-month. This positive trend in credit quality is expected to contribute to a gradual easing of credit tightening measures.

However, loan growth has shown some deceleration. As of May 2025, loan growth declined by 2.1% year-over-year, consistent with trends observed in previous months. This slowdown in loan expansion has raised some concerns among analysts about potential challenges in revenue growth.

Despite the near-term headwinds, some analysts project that Synchrony could achieve an EPS of around $9 per share by fiscal year 2026, indicating confidence in the company’s long-term earnings potential. The consensus EPS estimate for 2025 stands at approximately $8.71, reflecting expectations of solid profitability in the current fiscal year.

Strategic Partnerships and Growth Initiatives

Synchrony’s partnerships strategy has been a key focus for analysts and investors. The company’s renewed partnership with Amazon (NASDAQ:AMZN), which now includes Buy Now Pay Later (BNPL) options, is expected to be a significant driver of growth. Additionally, the upcoming launch of a partnership with Walmart (NYSE:WMT) later in 2025 is anticipated to boost loan growth in fiscal years 2026 and 2027.

The Walmart partnership, in particular, has garnered attention. Synchrony will become the main card issuer for Walmart following Capital One (NYSE:COF)’s termination of its partnership with the retail giant. While Synchrony cannot market directly to existing Walmart cardholders, analysts believe this partnership could potentially become a top 5 program for the company in the future. This strategic move comes as Synchrony demonstrates strong financial health, with InvestingPro reporting consistent dividend growth over the past three years and an active share buyback program, signaling management’s confidence in the company’s future prospects.

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Synchrony’s own in-house BNPL platform is gaining traction, present at 20% of surveyed partners, including a significant partnership with Lowe’s (NYSE:LOW). This positions the company well in the growing BNPL market, with only 25% of its partners having non-Synchrony BNPL options at checkout, suggesting less competitive pressure compared to peers.

Industry Trends and Competitive Landscape

The consumer finance industry is facing both opportunities and challenges. Positive trends in discretionary spending have been noted, with no anticipated impact from tariffs on consumer behavior for 2025 guidance. However, broader economic uncertainties continue to loom over the sector.

Synchrony’s position in the BNPL space appears relatively strong compared to some competitors. The company’s partnership with Atlanticus’ Fortiva card offers a second-look option that broadens its consumer underwriting capabilities and enhances partner value through higher customer conversion rates.

In the broader financial services landscape, analysts have observed stable flight activity in commercial aerospace and modestly positive trends in non-residential construction. These factors could indirectly influence consumer spending patterns and, by extension, Synchrony’s business.

Bear Case

How might the deceleration in loan growth impact Synchrony’s revenue?

The recent deceleration in loan growth, with a decline of 2.1% year-over-year as of May 2025, raises concerns about Synchrony’s revenue expansion. If this trend continues, it could put pressure on the company’s top-line growth. The slower portfolio growth than initially expected could indicate underlying challenges in consumer borrowing appetite or increased competition in the consumer finance space.

Additionally, the company has lowered its full-year portfolio growth guidance from low-single digits to flat year-over-year. This adjustment suggests that management anticipates continued headwinds in loan growth, which could translate to lower interest income and potentially impact overall profitability if not offset by other factors such as improved credit quality or operational efficiencies.

What risks does ongoing macroeconomic uncertainty pose to consumer spending?

Ongoing macroeconomic uncertainty remains a significant risk factor for Synchrony Financial. As a company heavily reliant on consumer spending and borrowing, any economic downturn or shift in consumer confidence could negatively impact its business model. Factors such as inflation, interest rate fluctuations, or geopolitical tensions could lead to reduced consumer discretionary spending, potentially affecting Synchrony’s loan volumes and revenue streams.

Moreover, while current credit trends are positive, a prolonged period of economic stress could lead to deterioration in credit quality, potentially increasing delinquencies and charge-offs. This could necessitate higher loan loss provisions, impacting Synchrony’s profitability and capital position.

Bull Case

How could improving credit quality trends boost Synchrony’s profitability?

The improving credit quality trends observed in recent reports present a significant opportunity for Synchrony to enhance its profitability. With delinquency rates and net charge-offs performing better than expected, the company may be able to reduce its loan loss provisions, directly benefiting its bottom line.

For instance, in the second quarter of 2025, Synchrony reported a significant reserve release of $265 million, compared to a reserve build of $70 million in the previous year. This reversal of previously cautious reserve levels demonstrates the potential for improved credit performance to translate into tangible financial benefits.

Furthermore, the company’s shift towards more super-prime borrowers could lead to sustained improvements in credit quality. While this may result in higher payment rates and consequently flat year-over-year portfolio growth, it could also mean lower risk and potentially higher net interest margins over time.

What potential does the Walmart partnership have for driving long-term growth?

The upcoming launch of the OnePay partnership with Walmart in the fall of 2025 represents a significant growth opportunity for Synchrony. As one of the world’s largest retailers, Walmart offers Synchrony access to a vast customer base and substantial transaction volumes.

Analysts anticipate that this partnership could become a top 5 or even top 3 program for Synchrony in the future. The potential for superior unit economics with the new Walmart card program, coupled with Synchrony’s ability to build the portfolio according to its underwriting standards, suggests that this partnership could be a major driver of long-term receivables growth and profitability.

Moreover, the digital card product through Walmart’s OnePay platform could significantly boost Synchrony’s market position in the evolving landscape of digital payments and financial services. This could help Synchrony capture a larger share of the growing e-commerce market and strengthen its competitive position against both traditional financial institutions and fintech challengers.

SWOT Analysis

Strengths:

• Strong partnerships with major retailers (Walmart, Amazon)
• Improving credit quality trends
• Established in-house Buy Now Pay Later (BNPL) platform
• Effective credit management demonstrated by better-than-expected delinquency rates

Weaknesses:

• Modest near-term loan growth
• Exposure to fluctuations in consumer spending
• Underperformance of 2022 and 2023 loan vintages compared to 2018 benchmark

Opportunities:

• Expansion of BNPL offerings across partner network
• Growth potential in Health and Wellness segments
• Upcoming Walmart partnership launch
• Potential for material gains in Net Interest Margin in second half of 2025

Threats:

• Ongoing economic uncertainty affecting consumer behavior
• Increasing competition in the BNPL space
• Potential for consumer credit deterioration in an economic downturn
• Regulatory changes affecting consumer lending practices

Analysts Targets

• Barclays (LON:BARC) Capital Inc.: Overweight rating, price target $80.00 (July 23rd, 2025)
• Citizens Bank: Market Outperform rating, price target $77.00 (July 23rd, 2025)
• Truist Securities: Hold rating, price target $63.00 (June 3rd, 2025)
• RBC Capital Markets: Sector Perform rating, price target $73.00 (January 29th, 2025)

This analysis is based on information available up to July 29, 2025, and reflects the views and projections of various financial analysts as of that date. Currently trading near its 52-week high of $73.42, Synchrony offers a dividend yield of 1.65% and has maintained dividend payments for 10 consecutive years. For comprehensive valuation analysis and expert insights, explore our detailed coverage on InvestingPro, featuring advanced metrics, Fair Value estimates, and professional-grade research tools.

InvestingPro: Smarter Decisions, Better Returns

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