On Wednesday, Bread Financial Holdings (NYSE:BFH) maintained its Outperform rating and a $67.00 stock price target from Keefe, Bruyette & Woods. The firm's confidence in Bread Financial stems from the announcement of a multi-year agreement with Saks Fifth Avenue, which will see Bread Financial becoming the issuer for Saks World Elite Mastercard (NYSE:MA) Credit Card and the Saks Credit Card starting August 2024.
The agreement includes Bread Financial taking over the existing Saks Fifth Avenue credit card portfolio from its current issuer, believed to be Capital One Financial (NYSE:NYSE:COF), in the third quarter of 2024. This transition is part of a definitive agreement signed between Bread Financial and Saks Fifth Avenue.
This partnership is significant for Bread Financial as it expands its financial product offerings and reinforces its position in the credit card market. Bread Financial's collaboration with a luxury retailer like Saks Fifth Avenue is expected to provide a boost to its consumer finance business.
The deal is set to commence in August 2024, with the transition of the Saks credit card portfolio slated for the third quarter of the same year. Bread Financial's role in issuing these cards is anticipated to begin alongside the portfolio transition.
The reiteration of the Outperform rating and the $67.00 stock price target indicates the firm's positive outlook on Bread Financial's stock performance, particularly in light of the new agreement with Saks Fifth Avenue. The partnership is seen as a strategic move for Bread Financial as it aims to grow its presence in the retail finance sector.
In other recent news, Bread Financial reported an increase in its net loss rate for May 2024, rising to 8.8% from 8.4% compared to the same month last year. The firm's delinquency rate also saw a slight increase, reaching 5.9% compared to 5.5% in May 2023.
On the other hand, Bread Financial's loan volume showed a slight decrease, with the end-of-period credit card and other loans amounting to $17,847 million at the end of May 2024, down from $18,078 million a year earlier.
In addition to financial performance, Bread Financial has also recently secured a multi-year agreement with luxury retailer Saks Fifth Avenue to offer co-branded and private-label credit cards. The deal is expected to be completed in the third quarter of 2024.
In terms of board developments, Bread Financial has expanded its board with the appointment of two new independent directors, Praniti Lakhwara and John J. Fawcett.
On the analyst front, Bread Financial received mixed ratings. Barclays (LON:BARC) Capital Inc. issued an "Underweight" rating, while Wolfe Research and Keefe, Bruyette & Woods upgraded the company to "Outperform". Still, Argus downgraded the company's shares from Buy to Hold due to a challenging revenue environment. These are the recent developments in Bread Financial.
InvestingPro Insights
Bread Financial Holdings (NYSE:BFH) has caught the attention of investors and analysts alike, especially after the recent announcement of the partnership with Saks Fifth Avenue. In light of this development, let's delve into some key metrics and InvestingPro Tips that may influence the company's financial outlook.
InvestingPro data shows that Bread Financial has a market capitalization of $2.01 billion and is trading at a low earnings multiple with a P/E ratio of 4.83 as of the last twelve months leading up to Q1 2024. This valuation could suggest that the stock is potentially undervalued compared to earnings. Furthermore, despite a -5.14% revenue growth over the last twelve months, the company has maintained a solid dividend yield of 2.18%, rewarding its shareholders consistently over the past nine years.
Two InvestingPro Tips for Bread Financial highlight both opportunities and risks: The company is trading at a low earnings multiple, which could indicate an attractive entry point for value investors. Moreover, Bread Financial has been able to maintain dividend payments for nine consecutive years, demonstrating a commitment to returning value to shareholders. On the flip side, six analysts have revised their earnings downwards for the upcoming period, and the company suffers from weak gross profit margins, which could be a cause for concern.
For those looking for a deeper dive into Bread Financial's performance and future prospects, InvestingPro offers additional tips and analytics. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover why analysts predict the company will be profitable this year and how it has remained profitable over the last twelve months. With a total of 9 additional InvestingPro Tips available, investors can gain a more comprehensive understanding of Bread Financial's potential in the evolving credit card market.
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