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Valued at a market cap of $50.2 billion, Discover Financial Services (DFS) is a leading digital banking and payment services company. It operates through two segments: Digital Banking, offering credit cards, personal loans, and deposit products, and Payment Services, managing the Discover Network, PULSE, and Diners Club International.
The credit card issuer and lender's shares have outperformed the broader market over the past 52 weeks. DFS has increased 64.8% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 22%. Moreover, shares of DFS are up 14.8% on a YTD basis, compared to SPX’s 3.3% gain.
In addition, the Riverwoods, Illinois-based company has also outpaced the Financial Select Sector SPDR Fund’s (XLF) 29.5% return over the past 52 weeks and a 6.2% YTD gain.
Shares of DFS rose 1.8% following its Q4 2024 earnings release on Jan. 22. Adjusted EPS of $5.11 exceeded the consensus estimate, jumping more than three-fold year over year, while revenues, net of interest expenses, increased 13.9% to $4.8 billion, beating estimates. Higher interest income from personal and credit card loan growth, along with rising PULSE and Diners Club volumes, drove results. Additionally, lower provisions for credit losses and improving net charge-off trends boosted investor confidence.
For the current fiscal year, ending in December 2025, analysts expect DFS’ EPS to decline 21.7% year-over-year to $13.88. The company’s earnings surprise history is mixed. It beat the consensus estimates in three of the last four quarters while missing on another occasion.
Among the 15 analysts covering the stock, the consensus rating is a “Moderate Buy.” That’s based on six “Strong Buy” ratings, one “Moderate Buy,” and eight “Holds.”
This configuration is more bullish than three months ago, with three “Strong Buy“ ratings on the stock.
On Jan. 28, Truist raised Discover's price target to $262, citing higher net interest margins, improving credit quality, and lower expenses. The firm maintained its “Buy” rating following strong Q4 results and an optimistic management outlook.
As of writing, DFS is trading below the mean price target of $214.43. The Street-high price target of $262 implies a potential upside of 31.3% from the current price levels.
