Capital One Financial shares are in a buy range after the credit card and consumer banking company completed a major acquisition. Capital One is the IBD Stock of the Day.
A Barclays analyst on Monday raised the price target on Capital One stock to 253 from 212 and kept an overweight rating. After updating the company's model for the acquisition of Discover Financial Services, Barclays estimates 2027 earnings per share of $25.28, a 20% increase from prior estimates, TheFly.com reported.
Other analysts also updated their estimates and raised price targets on Capital One stock after the deal was completed.
In May, Capital One completed its acquisition of Discover, one of its largest rivals. The deal, first announced in February 2024, put Capital One among the 10 largest U.S. banks in terms of assets. Discover continues to serve its customers under its own brand.
McLean, Va.-based Capital One has had uneven earnings performance in the past year. EPS fell 29% in 2023. Last year, EPS rose 39% in Q1, then declined 11% in Q2. Earnings edged up 1% in Q3 but rebounded 38% in Q4.
Still, Capital One stock has one of the highest EPS Ratings in the consumer loans industry group, at 93 out of 99. The IBD Composite Rating is 93 also.
In an SEC filing earlier this month, Capital One reported a credit card charge-off rate of 5.57% in May, an improvement from 5.66% in April. Loans delinquent more than 30 days also improved, to 3.85% from 3.95%.
Capital One Stock Estimates
For the current quarter, the consensus earnings estimate is $3.69 a share, an increase of 17%, according to FactSet. Capital One will announce second-quarter earnings on July 22 after the stock market close.
Net interest margin, a metric used to judge lenders, ranged from 6.7% to 7.11% the past four quarters. Analysts expect the margin to improve to 7.42% in the current quarter, rising above 7.8% in the next few quarters.
While the company's financial outlook appears to be firm, it's a different story on the political front.
The White House is considering an executive order against "debanking," The Wall Street Journal reported. The term is used to describe when banks deny services to customers for political reasons, such as gun makers or oil producers.
The Trump Organization sued Capital One in March over the bank's decision during President Donald Trump's first term to shut down hundreds of its corporate accounts. Capital One argued in a court filing the Trump Organization has offered no evidence.
Capital One did win a regulatory victory in February, when the Consumer Financial Protection Bureau dropped its enforcement action against it.
Capital One Stock In Buy Zone
Capital One stock on Tuesday climbed above the 204.48 buy point of a cup-with-handle base. The buy zone goes to 214.70. Volume was below average, but the relative strength line is near new highs.
While the 32% decline in the base was not excessive, it was deep enough to undercut the stock's previous base from November through January. That acts as a "reset" after the stock had nearly doubled from an initial breakout at 108.13 in December 2023. So its stock is in a first-stage base, a bullish indicator.
Capital One stock has a 21-day average true range (ATR) of 4.7%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
