JPMorgan Chase (JPM) has named credit-card issuer Capital One (COF) its top pick in the consumer finance sector.
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Analysts at the bank have upgraded COF stock to a Buy rating from Hold previously. JPMorgan says that the recent pullback in Capital One’s share price has been frustrating, but that there is now limited downside for the credit card company’s stock.
JPMorgan adds that Capital One has gotten caught up in the downturn for financial stocks, but is confident that few risks remain for the company and its shares. When Capital One reports its latest financial results in two weeks, it should report synergies from its acquisition of rival credit card company Discover, which could give the stock a boost. COF shares are down 21% this year.
The Discover Acquisition
Capital One recently completed its $35 billion takeover of Discover Financial following regulatory approval of the deal. Capital One’s all-stock purchase left its shareholders owning 60% of the newly combined company while Discover shareholders own the remaining 40%.
The combination with Discover Financial further expands Capital One’s credit card offerings and its deposit base. The deal is seen as a win for Capital One, which has been looking to boost its market share and better compete against the largest U.S. credit card issuers, Mastercard (MA) and Visa (V).
Is COF Stock a Buy?
Capital One’s stock has a consensus Strong Buy rating among 18 Wall Street analysts. That rating is based on 16 Buy and two Hold recommendations issued in the last three months. The average COF price target of $265.78 implies 36% upside from current levels.
