NEW YORK (TheStreet) -- Shares of Discover Financial Services Inc (DFS) are slipping, down 0.47% to $65.70 in early market trading Thursday, after the Riverwoods, IL-based payment services company was downgraded to "hold" from "buy" by analysts at Deutsche Bank this morning.
Analysts at the firm set a $68 price target on shares, and cited valuation as well as high expectations for Discover's loan growth.
Deutsche Bank analysts added that they see a better risk/reward ratio in shares of Capital One Financial Corp (COF) , which it initiated coverage on this morning with a "buy" rating.
Shares of Capital One are rising 0.77% to $82.20 this morning.
Separately, TheStreet Ratings team rates DISCOVER FINANCIAL SVCS INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate DISCOVER FINANCIAL SVCS INC (DFS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share, increase in net income and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 4.8%. Since the same quarter one year prior, revenues slightly increased by 5.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- DISCOVER FINANCIAL SVCS INC has improved earnings per share by 14.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DISCOVER FINANCIAL SVCS INC increased its bottom line by earning $4.96 versus $4.46 in the prior year. This year, the market expects an improvement in earnings ($5.34 versus $4.96).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Consumer Finance industry average. The net income increased by 8.6% when compared to the same quarter one year prior, going from $593.00 million to $644.00 million.
- 47.46% is the gross profit margin for DISCOVER FINANCIAL SVCS INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 25.98% is above that of the industry average.
- You can view the full analysis from the report here: DFS Ratings Report