Nomura Raises Price Target on Discover Financial (DFS)

Nomura Raises Price Target on Discover Financial (DFS)


Nomura Securities analysts raised the price target on Discover Financial Services (DFS) on Wednesday, noting that the financial services company is well positioned to outperform regardless of how the overall markets react going forward.

The analysts rate DFS as “Buy” and see shares reaching $54, up from the previous target of $50. This new price target suggests a 12% upside to Tuesday’s closing price of $48.31.

Nomura analysts noted, “Some investors remain optimistic that this year’s strong market returns are a function of an improving economy, while others take a more skeptical view that the rally has been fueled by nothing more than multiple expansion. Looking ahead, we see DFS as well-positioned to outperform regardless of whether markets move higher or pull back. Since the financial crisis, the market has attempted to “normalize” credit and NIM expectations, but it’s consistently been too conservative. We’re raising our estimates to reflect industry trends that suggest reserve builds will be more gradual than we previously expected. We’re also raising our price target to $54, which is based on 11x our estimate of 2014 earnings. In our view, an 11x multiple is appropriate for DFS based on a 10x baseline and our view that DFS deserves 1x of credit for the network.”

Discover shares were flat during morning trading on Wednesday. The stock is up +25.24% year-to-date.

The Bottom Line
Shares of Discover Financial Services (DFS) have a dividend yield of 1.66% based on last night’s closing price of $48.31 and the company’s annualized dividend payout of 80 cents per share.

Discover Financial Services (DFS) is not recommended at this time, holding a DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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