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Capital One Financial Corporation Message Board

  • profit_guy profit_guy Dec 7, 2009 10:42 PM Flag

    BARRONS just out, negative on AXP, COF, DFS

    December 7, 2009
    21:44 EDT BAC theflyonthewall.com: Credit card fundamentals will remain poor for several quarters, Barron's says

    Monday morning, Bank of America Merrill Lynch (BAC) analyst Kenneth Bruce upgraded American Express (AXP), Capital One Financial (COF) and Discover Financial Services (DFS) from Underperform to Neutral, citing improving employment data. All three of the stocks have risen more than 50% in the last six months, as investors eagerly anticipate a recovery in spending, fueled by declining unemployment and rising consumer sentiment. Still, Barron's says, with so much of the anticipated recovery already reflected in the share prices, these stocks hardly seem cheap given the long, rocky road that likely awaits the consumer. As Bruce himself writes in the research note, "each of the card stocks has already witnessed meaningful share price improvement," making them less attractive to potential investors. Nor can one point to fundamentals as a clear argument to the credit card's continued growth. Black Friday numbers show that shoppers continue to hunt for bargains above all else -- and spending is unlikely to ramp up dramatically in the near future. Credit quality also presents a mixed bag with net charge-offs down across the board, but overall delinquencies continued to climb. Investors looking to jump in the shares now would be buying before more data that supports the notion that both a recovery is truly underway and consumers are willing to spend more freely. such a point and after a run in the stocks that has already anticipated good times ahead.

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