Credit card issuer Discover Financial Services (
) saw its positive rating and price target reiterated on Friday by
analysts at FBR Capital.
The firm reiterated its "Outperform" rating and $19 price target
on the stock, noting its strong second quarter and expectation that
analysts will raise estimates for the company. That price target
represents a 35% upside to the stock's Thursday closing price of
An FBR analyst commented, "We reiterate our rating on shares of
DFS after its 2Q(May)10 earnings release. We are also increasing
our FY(Nov)10 and FY(Nov)11 EPS estimates. Overall, 2Q results beat
Street expectations handily on better credit outlook and resulting
reserve releases and lower revenue suppression benefiting margin.
Credit card sales volume growth was in line with preliminary trends
reported by the two major networks (Visa (
) and MasterCard (NYSE: MA_). We remain comfortable with our
above-consensus Street estimates; at 7x our normalized EPS
estimate, we believe shares are inexpensive."
Discover shares rose 7 cents, or +0.5%, in premarket trading
The Bottom Line
We have avoided shares of DFS since our early June 2008 coverage
began, when the stock was trading at $15.70. The company has a .57%
dividend yield, based on last night's closing stock price of
$14.08. The stock has technical support in the $12 price area. If
the shares can firm up, we see overhead resistance around the $16
price level. We would remain on the sidelines for now.
Discover Financial Services (
) is not recommended at this time, holding a Dividend.com DARS™
Rating of 3.3 out of 5 stars.
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