This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Capital One Rises, Alliance Falls After Goldman Report

NEW YORK ( TheStreet) --  Capital One (COF - Get Report) shares were rising after a Goldman Sachs upgrade Tuesday while shares of Alliance Data Systems (ADS - Get Report) were falling after the same Goldman Sachs analyst said the stock had gotten ahead of itself.

Capital One shares were higher by 1.06% to $77.49 minutes after the open on Tuesday. Goldman analysts led by Ryan Nash already had a "buy" on Capital One but added the stock to Goldman's "conviction list." Nash expects higher margins from Capital One as credit card growth turns positive in the second half of 2014. He also expects improving expense leverage, payouts rising to 65% to 70%, and increased investor comfort with net chargeoffs of less than 5% long term.

"Combined, these elements should translate to $8+ of earnings over time. As the market becomes more comfortable with this issues, we believe COF's multiple (10.3x 2015E) could trade closer to that of a super-regional bank (11.5-12x), driving further upside," the report states.

Nash downgraded Alliance, on the other hand, arguing the shares had come too far too fast.

"Shares have outperformed by almost 50% the past year and while we are still positive on ADS's long-term growth trajectory, the story is less compelling at current levels. While private label card balance growth could surprise to the upside (we model 17% in 2014), near-term losses could be higher than expected (we see 5.2% in 4Q13 and 5.0% in 1Q14), limiting the beat and raise story," the report states.

Must Read: JPMorgan Pays $1.7 Billion for Role in Madoff Scandal

Alliance shares were down 2.09% to $252.88 in the first hour of trading.

Nash and his team retained Discover Financial Services (DFS) on the Goldman conviction list, also pointing to investor "comfort" with sustained low charge-off rates. They also look for continued market share gains in Discover's lending business as investments made in businesses such as checking and student lending and a rewards card known as "Discover it" drive further growth.

Discover shares were higher by 0.59% to $54.68 in early trading Tuesday.

COF Chart
COF data by YCharts

-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ADS $202.85 -0.23%
COF $73.57 1.60%
AAPL $93.66 -0.09%
FB $118.57 0.84%
GOOG $698.30 0.76%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs