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DFS

Planning for Next Earnings Season: DFSNYSE:DFS has a platform trend since the highs and lows are very consistent, suggesting controlled buying over time. It had a compression pattern before the pop out of the box white candle and a small gap up candle as the first attempt to break out to the upside. The stock may drop back into the platform range but if it holds, it's a good indication that earnings have improved. This is an example of a good pattern to watch for a pre-earnings run setup with potential to swing trade to earnings. Discover reports July 17th.
NYSE:DFSLong
by MarthaStokesCMT-TechniTrader
Capital One to Buy Discover for $35 BillionThe country’s ninth-largest bank, Capital One (NYSE: COF), shocked the finance world when it announced that it will buy Discover Financial Services (NYSE: DFS) for a staggering $35 billion. This all-stock deal is set to be one of the biggest M&A deals of 2024, bringing together two of the nation’s credit card giants to create a true global payments powerhouse. But, what drove Capital One to make this move? It’s clear as day that the Berkshire Hathaway-backed (NYSE: BRK.B) Capital One has finally had enough of the sky-high fees associated with Visa (NYSE: V) and Mastercard (NYSE: MA). By snatching up Discover, Capital One won’t just compete with these industry titans, but it could break free from their clutches altogether. After the news, DFS stock rose 15.6% in premarket trading, while COF stock fell by 3.5%. But there’s just one problem: The rise in DFS stock doesn’t reflect the nearly 27% premium Capital One valued Discover at, which could suggest that investors aren’t entirely convinced that this deal will come to fruition. The Deal Under the terms of the all-stock deal, if you’re a Discover shareholder, you’ll receive 1.0192 shares of COF stock for each DFS stock you own. And what’s really interesting about this is that Discover has a market cap of $27.6 billion, and the deal is valued at $35 billion, which means it’s a 26.6% premium over its closing price on the 16th of February. Moreover, after the deal closes, Capital One shareholders will hold roughly 60% of the combined company, while Discover shareholders will own the remaining 40%. What is Capital One Getting? For starters, now is a good time for credit card companies to make big moves like this one. There’s a boom in the credit card sector because more and more customers are switching from paying with cash to cards. This is largely thanks to generous rewards programs and the strong rise in e-commerce, which started to take off during the pandemic. Additionally, card issuers are getting a boost from increasing credit card debt, which continued to increase last year amid rising prices and declining savings. As for what it’s getting from the deal, buying Discover would give Capital One a large card network, greatly increasing its power in the payments ecosystem. And this is important because card networks are essential for making transactions happen, as well as setting the fees that sellers pay when customers shop with their credit cards. This would allow Capital One to negotiate interchange fees and other terms directly with merchants, making Capital One more of a competitor to companies like Visa and Mastercard. Notably, shares of Visa were down 1.8% in premarket trading after the news, while Mastercard stock was down 3.2%. The deal would also increase the number of cardholders Capital One counts as customers for its credit-card lending business. This deal doesn’t just give Capital One numbers, but quality too, since many Discover cardholders have high credit scores. The deal would also allow Capital One to get its hands on the consumer deposits in Discover’s savings accounts, an area where it already has a large presence but would like to continue growing. When you compare Discover to competitors like Visa and Mastercard, you’d think that Discover is a very small company, but what makes it unique is that it’s one of the few U.S. card issuers that actually have payment networks. Which is the main reason why Capital One is buying it in the first place. Even though it uses Visa and Mastercard for most of the cards it issues, it will likely begin switching some of its cards to Discover after the deal closes. Even after the deal closes, Capital One will continue using Visa and Mastercard thanks to its wider reach. For example, Discover currently has 70 million merchant acceptance, compared to Visa’s 130 million and Mastercard’s nearly 100 million. Still, this could be a play from Capital One to reduce its dependence on Visa and Mastercard, as the pair have come under fire recently for their high fees they charge for processing payments. Some lawmakers have even accused them of forming a “duopoly”. Discover’s Recent Troubles For Discover, the deal couldn’t have come at a better time. The company was going through a tumultuous period with increased regulatory scrutiny and two changes in its leadership. Discover’s troubles are a result of a statement issued last year, in which it stated that it had misclassified certain credit card accounts beginning in 2007 and had incorrectly placed them in the highest pricing tier. As a result, the company was forced to record a liability of $365 million in estimated compensation for everyone involved. In addition to that, Discover received a consent order from the FDIC regarding consumer compliance, but Discover did not release many details about the matter. Discover escaped a fine from regulators after reaching an agreement with the FDIC to improve its compliance management system. A Decade of Offers Interestingly, this is not the first time Discover was approached by a large bank or even a tech company for an acquisition. In fact, the company has been receiving offers for the last decade, especially from tech companies. The reason Discover accepted this deal and not those from tech companies is likely because they were only interested in its payments and card network. For tech companies, Discover offered an opportunity to play a more central role in payments. But, Discover’s older management wasn’t interested in separating the company’s credit card lending side from the network, which is why many deals were rejected. On the other hand, Capital One said that it’s planning to keep the Discover brand on the cards and network. If the deal happens, it will certainly rank among the biggest deals so far for 2024. After a slowdown in M&A activity in 2023 due to increased interest rates that reduced the appetite for massive deals, this deal between Capital One and Discover could reignite interest in this market. The Combined Company There’s an opportunity here to create a new credit card giant, but the main concern for shareholders of COF stock and DFS stock can be summed up in one question: Will the resulting company outperform the broader market in the long-term? Over the past 10 years, COF stock has underperformed SPY with an annualized return of 8.39%, while SPY has yielded a comparatively higher 12.62% annualized return. Compared to the XLF, COF stock has also underpeformed offering an annualized return of 8.39% over the last 10 years, while XLF has yielded 13.08% annualized return. The same can be said for DFS stock which underperformed the XLF during this same period and compared to the SPY, achieved an annualized return of only 9.97% compared to the SPY’s 12.62% annualized return. It’s possible that these two companies hope that combined, they will be able to outperform these benchmarks and take on industry giants. With this merger, the resulting company would create the largest card issuer in the US – immediately surpassing JPMorgan Chase. While Jamie Dimon brushed it off saying “let them compete. Let them try”, the merging companies are likely hoping to capitalize on the credit card sector boom and use their advantages and synergies to generate higher profits and shareholder value than COF stock or DFS stock could achieve on their own. COF Stock Forecast If the deal is approved by regulators, the COF stock forecast looks notably bullish. In fact, Citi analysts stated that with Discover’s valuable payments network it will unlock value that neither company could achieve on its own. As a result, Citi increased its price target for COF stock to $152, offering 11% upside from its closing price on the 16th of February. However, one glaring risk is the fact that M&As of large companies are super hard to pull off. Together, Capital One and Discover will become the sixth-largest bank in the US, with consolidated assets of almost $625 billion. A combination like this will undoubtedly come under intense antitrust scrutiny. The deal is already seeing push back from Senator Warren and 12 congressional Democrats who wrote Acting Comptroller Michael Hsu and the Michael Barr, urging them to block the deal. This appeal is based on their belief that the deal would reduce competition and reduce card issuers’ incentives to offer customers favorable terms. However, its possible that regulators will be more amenable to this deal, since Capital One is a well known company and considered to be a “good actor”. Not to mention, Discover previously pledged to invest $500 million to better its compliance operations after its troubles with the FDIC. Setting aside these regulatory concerns, the two companies expect the deal to close late this year or in early 2025. There is a lot at stake for Capital One which stated that shifting away from Visa and Mastercard’s “duopoly” would help it generate an extra $1.2 billion in revenue in 2027. While COF stock offers a tempting opportunity for long-term investors, veteran investors have seen time and again major deals fall through. Whether it was the collapse of Adobe’s acquisition of Figma or the UK’s decision to block Microsoft’s $69 billion acquisition of Activision Blizzard, its not unusual for these deals to fall through or at the very least face hurdles such as in Microsoft’s case.
NYSE:COF
by Penny_Stocks_Today
Capital One Buying Discover Financial For $35.3 BillionCapital One Financial announced its $35.3 billion all-stock acquisition of Discover Financial ( NYSE:DFS ). This landmark deal, poised to reshape the credit card industry, comes at a time of heightened regulatory scrutiny and strategic maneuvering. Unlocking Value Through Synergies: Capital One's ( NYSE:DFS ) strategic vision for the acquisition hinges on unlocking synergies to drive operational efficiency and enhance shareholder value. With projected synergies of $1.5 billion by 2027, the combined entity aims to streamline operations and capitalize on economies of scale. Antitrust Scrutiny and Regulatory Hurdles: Analysts caution that the deal will face intense antitrust scrutiny, considering Capital One and Discover's significant presence in the highly concentrated credit card market. Regulators are expected to closely scrutinize the potential impact on market competition and consumer choice, raising concerns about potential roadblocks. Navigating Regulatory Complexities: Despite the regulatory challenges ahead, Capital One remains optimistic about navigating the complex regulatory landscape. The company is prepared to engage with regulators and address concerns proactively, emphasizing the long-term value creation potential of the merger. Market Reaction and Investor Sentiment: Investors responded positively to the announcement, driving Discover Financial's stock price to its highest level in nearly two years. The surge in share price underscores investor confidence in the strategic rationale behind the acquisition and the potential for value creation. Implications for the Credit Card Industry: The merger between Capital One and Discover Financial ( NYSE:DFS ) is set to reshape the competitive dynamics of the credit card industry. As the largest player in a highly concentrated market, the combined entity will wield significant influence, potentially triggering further industry consolidation and competitive responses. Conclusion: Capital One's bold move to acquire Discover Financial ( NYSE:DFS ) marks a pivotal moment in the evolution of the credit card industry. Despite regulatory hurdles and antitrust scrutiny, the potential synergies and value-creation opportunities are poised to drive long-term growth and profitability.
NYSE:DFS
by DEXWireNews
Navigating Opportunities: $DFS in the Face of Q4 Headwinds Discover Financial Services (NYSE: NYSE:DFS ) recently faced a challenging fourth quarter, reporting a significant dip in net income and diluted earnings per share amidst rising charge-offs. Despite this, the company showcased resilience in key areas, with robust loan growth and revenue expansion. We delve into the details of Discover's performance, the factors influencing its financial landscape, and the strategic moves it is making to navigate the current market conditions. Financial Snapshot: Discover's Q4 financials reveal a 62% drop in net income to $388 million, with diluted earnings per share plummeting to $1.54 from $3.74 in the same quarter of the previous year. The company experienced a noteworthy 15% increase in total loans, reaching $128.4 billion, while total revenue net of interest expense grew by 13% to $4.196 billion. However, the total net charge-off rate spiked significantly to 4.11%. Operational Performance and Challenges: Discover Financial Services operates in the competitive landscape of direct banking and payment services, issuing credit and debit cards, alongside providing various consumer banking products. The company's 2023 performance saw substantial asset and deposit growth, maintaining a resilient net interest margin. However, increased net charge-offs posed challenges, touching the lower end of the expected range. Interim CEO and President John Owen emphasized the company's commitment to enhancing risk management and compliance programs. Despite the decline in profitability, Discover made strategic moves, including the launch of the Cashback Debit product and the announcement of a new CEO, aiming to fortify shareholder value in the future. Segmental Analysis: Breaking down its segments, Discover's Digital Banking reported a pretax income of $458 million, reflecting an $848 million decrease from the prior year. Higher provision for credit losses and increased operating expenses offset higher revenue net of interest expense. On the other hand, the Payment Services segment experienced a $17 million increase in pretax income, primarily due to elevated PULSE revenue. Financial Achievements and Concerns: The company's achievement in loan growth to $128.4 billion signifies strong consumer demand and an expanding lending portfolio. Revenue growth is a positive indicator of the company's ability to generate income from core business activities. However, the rising net charge-off rate by 198 basis points raises concerns about deteriorating credit quality among borrowers. Market Response: Discover Financial Services' stock witnessed a 7.2% decline, trading at $100.90 about 20 minutes before the opening bell after the weak Q4 earnings report. The company fell short of analysts' expectations, and concerns about tougher conditions facing consumers led to a higher bad debt provision. Looking Ahead: Despite the challenges, there are potential signs of support for NYSE:DFS shares. Technical analysis suggests a potential area of support just below $100, where the 50-day moving average is poised to cross above the 200-day moving average, forming a bullish golden cross signal. Conclusion: Discover Financial Services ( NYSE:DFS ) faced headwinds in Q4 2023, with a notable decline in profitability and increased charge-offs. However, the company's strategic initiatives, robust loan growth, and revenue expansion indicate a commitment to navigating challenges. As Discover charts its course for the future, investors will keenly watch how the company's leadership, risk management measures, and product innovations contribute to its resilience and long-term success in a dynamic financial landscape.
NYSE:DFSLong
by DEXWireNews
DFS - DAILY CHARTHi, today we are going to talk about Discover Financial Services and its current landscape. As nowadays we live in a consumerist society and access to a credit card has continually become easier to obtain, is reasonable to predict that the card debts are also going to rise too, as financial education isn't the strong point of U.S consumers, and are used to the debt culture. The heat up U.S economy put credit card companies in a more comfortable zone as the unemployment rate remains near to historic lows, which helps customers to keep up with their bills. However, the question that worth to be raised here is, if the 90 days past due card debt is probably surging to 2.01%, the highest level since 2010 amid a heated economy, what is going to happen with this type of debt, once the U.S economy make its first downward movement of correction and make harder for customers pay their credit card bills. Even with the credit card issuers tighten their credit standards, we can't be sure it's going to be enough to avoid a crisis on the sector, which could lead to a flood of bad debt, decline of new credit card issuance and other types of liabilities. This scenario could mean concerning news for Discover Financial Services if the company doesn't progressively start to deploy the proper countermeasures for this scenario. Thank you for reading and leave your comments if you like. To have access to our exclusive contents, join the Traders Heaven today! Link Below. Disclaimer: All content of Golden Dragon has only educational and informational purposes, and never should be used or take it as financial advice
NYSE:DFS
by Igor-Silva