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Discover Financial Services (DFS), based in Riverwoods, Illinois, is a premier provider of direct banking and payment services. Valued at $33.29 billion by market cap, the company is widely recognized for its offerings in credit cards, personal loans, and student loans, as well as its global payments network, which encompasses Discover Network, PULSE, and Diners Club International.
Shares of the credit service titan have significantly outperformed the broader market over the past year. The stock has gained 110.5% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 32.1%. The robust price action can be seen in 2024, where the stock soared 62.5% compared to SPX’s 26.2% rise on a YTD basis.
Narrowing the focus, DFS has also outperformed compared to the iShares U.S. Financial Services ETF (IYG). The exchange-traded fund has gained about 49.8% over the past year. Moreover, the ETF’s 37.4% gains on a YTD have lagged behind the stock’s robust returns over the same time frame.
Shares of Discover Financial surged by 21% on Nov. 6, following expectations that the Trump administration would ease regulations on the banking industry, contributing to a broader rally in bank stocks.
On Oct. 16, DFS announced its Q3 earnings, and its stock rose nearly 2% in the following trading session. Its EPS of $3.69 surpassed Wall Street’s expectations. Also, the adjusted revenue of $4.5 billion beat the market’s consensus, leading to a rally in price.
For the current fiscal year, ending in December, analysts expect DFS’ EPS to grow 18.5% year over year to $13.34 on a diluted basis. The company's earnings surprise history is mixed. It missed the consensus estimates in two of the last four quarters while beating on two other occasions.
Among the 14 analysts covering DFS stock, the consensus rating is a “Moderate Buy.” That’s based on three “Strong Buy” ratings, one “Moderate Buy,” and 10 “Holds.”
The current consensus has been fairly stable over the past months.
On Oct. 30, Evercore Inc. (EVR) analyst John Pancari maintained Discover Financial with an “In-Line” rating and increased the price target from $156 to $163.
While DFS currently trades above its mean price target of $163.31, the Street-high price target of $193 suggests an upside potential of 5.7%.
