Yahoo Finance Here's Why Hold Strategy is Apt for Synchrony (SYF) Stock Now
Synchrony Financial SYF is well-poised to grow on the back of strategic acquisitions, growing digital capabilities, and cost-control efforts. Its shareholder value-boosting measures are major positives.
Synchrony — with a market cap of $12.3 billion — is a premier consumer financial services company, which offers a wide range of credit products. Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
The Zacks Consensus Estimate for SYF’s 2023 earnings is pegged at $4.88 per share. The stock has witnessed five upward estimate revisions in the past week against seven in the opposite direction. Synchrony beat on earnings in three of the last four quarters and missed once, the average surprise being 6.6%. This is depicted in the graph below.
Synchrony Financial Price and EPS Surprise
Synchrony Financial price-eps-surprise | Synchrony Financial Quote
The consensus mark for current-year net interest income stands at $16.8 billion, suggesting a 7.8% rise from the prior-year reported number. Our estimate indicates a significant increase in interest on investment securities, which is likely to support the top-line growth.
SYF’s solid CareCredit brand holds ample growth potential. The company keeps expanding the brand’s capabilities with prudent acquisitions and collaborations. This is expected to aid its Health & Wellness platform, which witnessed 10.2% year-over-year growth in accounts in 2022. Our estimate for the metric in 2023 indicates a further 7.7% increase.
Synchrony expects total loan receivables growth to be more than 10% for 2023 following a 14.5% increase witnessed last year. It expects quarterly operating expenses to be around $1,125 million for 2023, which will ensure that full-year expense growth remains lower than the net interest income growth. It also anticipates the net interest margin to be within 15-15.25% this year.
SYF’s measures to reward shareholders through dividends and share buybacks are noteworthy. Its dividend yield of 3.1% compares favorably with the industry average of 2.5%. Owing to its solid capital position, the company returned $500 million to shareholders through share buybacks of $400 million and dividends of $100 million, in the first quarter. Further, it had a remaining share buyback fund of $300 million at the end of March 2023.
Key Risks
However, there are a few factors that might hinder the stock’s growth.
Synchrony estimates net charge-offs for 2023 to be in the range of 4.75-5%, which suggests a significant increase from the 2022 reported figure of 3%. Also, the persisting economic volatility is forcing the company to increase the allowance for loan losses. In the first quarter, the metric rose 10% year over year. Nevertheless, we believe that a systematic and strategic plan of action will drive SYF’s growth in the long term.
Key picks
Some better-ranked stocks in the broader finance space are Allianz SE ALIZY, Lemonade, Inc. LMND and Argo Blockchain plc ARBK, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Allianz’s 2023 earnings is pegged at $2.53 per share, indicating 48% year-over-year growth. Over the past 60 days, ALIZY has witnessed one upward estimate revision against none in the opposite direction.
The Zacks Consensus Estimate for Lemonade’s 2023 earnings suggests 15.9% year-over-year growth. Also, the consensus mark for LMND’s revenues in 2023 suggests a 53.6% year-over-year rise.
The Zacks Consensus Estimate for Argo Blockchain’s 2023 bottom line has improved 47.9% over the past month. During this time, ARBK witnessed two upward estimate revisions against none in the opposite direction.
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Synchrony Financial (SYF) : Free Stock Analysis Report
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