Buy Synchrony Financial (NYSE: SYF)

By Linda McDonough • April 27, 2018

Target: $50

Buy Up To: $35

Options Trade: I don’t have an options trade yet on SYF. Once I identify an event that I believe will move the stock, I’ll send along a recommendation for an options trade.

I’ve been eyeing Synchrony for some time. The company’s extension of its relationship with PayPal (NSDQ: PYPL) is intriguing. I think PayPal will be one of the biggest beneficiaries of person to person payments via its Venmo service and believe Synchrony can capitalize on that success.

A deal signed last November made Synchrony Bank the exclusive issuer of the PayPal Credit online consumer financing program in the U.S. for the next ten years.

In the meantime, the company is focusing on retail private label credit cards and higher growth dental and veterinary credit markets. Tighter underwriting standards enacted in late 2016 should begin to flow through the company’s credit quality metrics.

The company’s first-quarter results (announced on April 20) coincident with higher interest rates are giving investors a chance to buy the stock at a reasonable price. Despite beating estimates, the stock trended down as receivables growth was squarely in the middle of management guidance but missed the high end.

I am, however, keeping a low buy limit on the stock to account for the risk of higher rates squeezing consumers.

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Daniel Long

04/27/18 ‐ 10:31am ET April 27, 2018 at 10:31am ET

Is that stock-moving-event necessary to push the stock from 33 to 50 in the next 6 months? Or do you think that the company is basically worth 50/sh now?
DL

Linda McDonough

04/28/18 ‐ 4:45pm ET April 28, 2018 at 4:45pm ET

Daniel,
My target is based on current 2018 and 2019 estimates. However, I believe that improving credit metrics for the company and growth via its PayPal relationship are what will move the stock higher. My biggest worry with this stock is industry sentiment. Investors get nervous when the yield curve flattens out (a lower spread between short-term and long-term rates).
Best,
Linda

Jeffrey J

04/27/18 ‐ 10:41am ET April 27, 2018 at 10:41am ET

Filled @ $33.32 at TradeStation.

Victor

04/27/18 ‐ 10:57am ET April 27, 2018 at 10:57am ET

filled @ 33.32 on Ally

Rick

04/30/18 ‐ 1:52pm ET April 30, 2018 at 1:52pm ET

I bought Sep 33 calls at $2.50.

DJ

04/30/18 ‐ 9:54pm ET April 30, 2018 at 9:54pm ET

Hi Linda,
I am new here. how do I enter your trade recommendation? is it just simply buying their stock at $35 or lower? also, Is it too late to buy SYF?

05/01/18 ‐ 7:31am ET May 1, 2018 at 7:31am ET

Hi DJ,
My recommended buy limit prices are just that, recommendations. Some subscribers will still purchase stocks above that price.

However, SYF is still trading below my buy limit price (trading at $33.17 as of pre-market open Tuesday).
Best,
Linda

Laurent Caux

07/05/18 ‐ 2:38pm ET July 5, 2018 at 2:38pm ET

Hello Linda.

Would you recommend buying a protective put on SYF with earnings on July 20th? If so, what level do you recommend? Thanks.

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