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Capital One: Seasonal Flu Loser

The company's annualized ratio of net charge-offs to average loans increased to 2.26% in the fourth quarter from 1.75% in the third quarter, "largely because of the diminishing impact of the credit mark," while the net charge-off rate for credit card loans increased to 4.35% from 3.04%, "also driven by seasonality and the diminishing impact of the credit mark."

Oppenheimer analyst Chris Kotowski rates Capital One "Outperform," but on Friday lowered his with a 12-18 price target for the shares by three dollars to $68, and said in a note that "for the second year in a row COF threw an air ball in 4Q. Last year it was a stunning expense bulge and this time it was not so much the 4Q results themselves but the guidance that pre-provision earnings would be flattish with the 4Q level in 2013 and that it did not plan to ask the Fed for any share repurchases in this year's [stress test] process."

"Nevertheless," Kotowski said that "in cases like this we find it best to put the emotion aside and do our numbers, and they point us to a still compelling but lower $68 price target on our downwardly revised $6.50 estimate, and thus we maintain our Outperform."

Kotowski lowered his 2013 EPS estimate from $7.03. His 2014 EPS estimate is $7.15.

Capital One's shares now trade for 8.5 times the consensus 2013 EPS estimate of $6.67. the consensus 2014 EPS estimate is $7.05.

Orips Research CEO Zev Spiro says that the technical picture for Capital One's shares isn't all bad: "The end of a primary uptrend was signaled today for Capital One, via a high volume downward gap that broke below a bullish support line that began in 2011. The break indicates a shift in the primary trend from positive to neutral. Both the breakaway gap and accompanying high volume add confidence to the signal. On a positive note, prices tested and held the 200-Day Simple Moving Average, currently at $56.26, a level that recently halted a sharp decline in November 2012. Portfolios should monitor significant support in the $55/$56 area as a confirmed break below support could signal additional risk."
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