Why Investors Should Look At Discover Financial Services Stock

Investors are focusing on the prospects of rising operating expenses at Discover Financial Services DFS in 2021 and the uncertainty around the resumption of loan growth, which has “overshadowed the stark fundamental improvement in the outlook,” according to BofA Securities.

The Discover Financial Services Analyst: Mihir Bhatia upgraded the rating for Discover Financial Services from Neutral to Buy, while raising the price target from $109 to $120.

The Discover Financial Services Thesis: The stock had only a muted response to the company delivering a beat on most key metrices in the first quarter and significantly raising its credit and capital return outlook, Bhatia said in the upgrade note.

“DFS believes that there is an opportunity to drive long-term growth through increased marketing and further investments in data and analytics. While investors would have preferred the full benefit of the reopening drop to the bottom-line, DFS is focusing on the longer-term,” the analyst wrote.

“We think this is the right strategy and believe DFS’ strong management team has earned the benefit of the doubt,” he added.

“Near-term outlook appears favorable, we think credit and capital return has materially improved and DFS is well-positioned to deliver attractive growth,” Bhatia further stated.

DFS Price Action: Shares of Discover Financial Services had jumped 3.04% to $105.98 at the time of publication Monday morning.

(Photo: Discover)