On Tuesday, Baird adjusted its outlook for Capital One Financial (NYSE:COF), increasing the price target to $165 from the previous $150, while keeping a Neutral stance on the stock. With a current market capitalization of $70.6 billion and trading near $185, InvestingPro analysis suggests the stock is fairly valued.
The firm noted a rise in domestic card net charge-offs (NCOs), which went up approximately 26 basis points month-over-month to about 6.08% in November. This increase follows a roughly 59 basis points rise in October, and the current figures are above the traditionally normal range of 450-525 basis points.
The year-over-year comparison paints a similar picture, with an increase of approximately 89 basis points, compared to the 74 basis points increase observed in October. Despite these rising NCOs, delinquencies have shown a slight month-over-month decline of around 4 basis points, though they have experienced a marginal year-over-year increase of about 2 basis points, resulting in a delinquency rate of approximately 4.57%.
According to InvestingPro data, Capital One maintains strong financial health with a GOOD overall score, and has consistently paid dividends for 30 consecutive years.
Moreover, the end-of-period card balances have seen a year-over-year growth of around 5.0%, which is a deceleration from the approximately 6.0% increase reported in October. The analyst's commentary reflects these recent trends in Capital One's performance metrics, which are closely watched indicators of financial health and credit quality in the banking sector.
Baird's updated price target suggests a level of caution amid the observed changes in charge-offs and delinquencies, which are key factors in assessing the risk profile of credit card portfolios. The maintenance of a Neutral rating indicates that while there are positive aspects to Capital One's financial performance, there are also factors that warrant a more tempered expectation for the stock's movement.
In other recent news, Capital One Financial Corporation (NYSE:COF) disclosed its monthly charge-off and delinquency statistics for November 2024, providing key indicators of the company's financial health. Concurrently, the company announced dividends for both common and various series of preferred stock, with payments scheduled for November and December 2024.
Capital One's proposed acquisition of Discover Financial Services (NYSE:DFS), valued at $35.3 billion, is another significant development, currently under scrutiny for potential antitrust violations.
Citi maintained a Buy rating on Capital One's shares and increased the price target to $225 from the previous $190, reflecting optimism about the company's potential earnings growth following the planned acquisition.
Citi's analysis of Capital One's performance also highlighted the company's asset sensitivity, which is expected to be partly balanced by growth in the card segment.
However, Capital One is also facing possible enforcement action by the Consumer Financial Protection Bureau over allegations of misrepresentation concerning its savings accounts.
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