Capital One upgraded as bet on higher-risk customers looks set to pay off
Capital One Financial Corp. was upgrade to buy from neutral at Instinet, which cited a more bullish outlook on the credit card issuer's focus on higher-risk customers. Analyst Bill Carcache raised his stock price target to $105, which is 25% above Tuesday's closing price of $84.17, from $97. Carcache said that Capital One has stood out as the only major card issuer that has increased its mix of subprime customers since the Great Recession, while its rivals, such as Bank of America Corp. , Citigroup Inc. , Discover Financial Services , J.P. Morgan Chase & Co. and Synchrony Financial , have been cutting their subprime exposure. "We've now reached a point in the cycle where we believe [Capital One's] subprime bet is about to pay off, handsomely," Carcache wrote in a note to clients. The stock, which was still inactive in premarket trade, has lost 3.5% year to date, while the SPDR Financial Select Sector ETF has tacked on 2.2% and the S&P 500 has gained 5.4%.
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