Piper Sandler Analyst Upgrades Discover Financial to Strong Buy with 24% Price Target Increase

Piper Sandler's Kevin Barker upgraded their rating on Discover Financial Services (NYSE: DFS) from Hold to Strong Buy on 2024/01/03. The analyst also raised their price target by 24% from $104 to $129.

Barker's optimistic outlook for Discover Financial Services (DFS) stems from a belief that the headwinds the company faced in 2023 will ease up in the coming year. Specifically, Barker expects the company's default rates on credit cards to show improvement, thanks to easier comparisons. Additionally, Barker predicts that stock repurchases will resume by the middle of the year, providing more clarity on lingering regulatory issues.

"Discover currently trades at a sizable discount on most valuation multiples relative to historical averages, which put it in a good position to be re-rated," Barker argued.

This upgraded rating comes at a time when 75% of top-rated analysts currently rate DFS as a Strong Buy or Buy, with the remaining 25% considering it a Hold. Notably, no analysts recommend or strongly recommend selling the stock.

Looking ahead, the consensus forecast among analysts is that DFS's upcoming year will deliver earnings per share (EPS) of $14.63. If the analysts' predictions hold true, DFS's next yearly EPS will experience an 8.4% increase on a year-over-year basis.

Examining DFS's recent performance, since the company's last quarterly report on September 30, 2023, the stock price has surged by 27.8%. Over the past year, the stock has seen a 14.2% increase. However, during this period, DFS has slightly trailed behind the S&P 500, which has risen by 23%.

It is worth noting that Kevin Barker, the analyst behind this upgraded rating, is ranked in the top 9% of Wall Street analysts by WallStreetZen. With an average return of 10.7% and a 60.8% win rate, Barker specializes in the Technology, Real Estate, and Financial Services sectors.

Discover Financial Services, founded in 1985 and headquartered in Chicago, IL, owns and operates Discover Bank. The company offers a range of financial services, including checking and savings accounts, personal loans, home equity loans, student loans, and credit cards. Discover Financial Services also owns and operates the Discover and Pulse networks, as well as Diners Club International. With approximately 50 million cardholders in the U.S., DFS holds a significant presence in the financial services industry.

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