Jose Luis Pelaez Inc
Jose Luis Pelaez Inc
Barclays turned neutral on consumer finance stocks (earlier positive) as they will likely get more inexpensive if a recession materializes in 2023 and “risk trading at trough multiples on trough earnings”.
“Given that Barclays economists are calling for a recession in 2023, we think these stocks could get more inexpensive before they work, so we view the risk/reward as balanced and downgrade Discover Financial Services (NYSE:DFS), Synchrony Financial (NYSE:SYF), OneMain Financial (OMF), and Oportun Financial (OPRT) to Equal Weight from Overweight,” said analyst Mark DeVries in a note to clients.
DeVries expects multiple expansion for the above stocks to be capped around current valuations, with significant downside risk in a recession.
Barclays also removed its top pick designation for OneMain (OMF).
Rationale for downgrades
Earlier, credit card metrics climb closer to pre-pandemic levels in November.