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Capital One Financial (NYSE:COF) stock gained 1.9% in Thursday morning trading after Jefferies Equity Research upgraded the company to Buy from Hold on the view that there will be more opportunities for earnings growth relative to peers.
“At a high level, we believe that COF has pursued strategic priorities over the past few years, including migrating the loan mix away from higher-risk assets and tightening underwriting at a prescient time,” analyst John Hecht wrote in a note.
Such moves, he added, leave Capital One (COF) in a stronger position “as they appear ahead of their peers in credit improvement and can lean into markets such as auto finance, where competition is low.”
The sell-side analyst also pointed to the $35B acquisition of Discover Financial Services (DFS), which will be “transformative, accretive, and provides optionality adding to the potential upside.”
In all, Hecht expects COF to post “superior earnings growth” through 2025 given improving credit.
His Buy rating diverges from the SA Quant system rating and the average Wall Street analyst rating, both at Hold.
