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Synchrony Financial: Risks Remain But The Latest Move Down Was Overdone

November 5, 2018

Summary: 

- Synchrony Financial's stock has not performed well so far in 2018 and the uncertainty related to the Walmart deal is not helping.

- However, the company continues to report impressive operating results and the most recent quarter was more of the same.

- I am long Synchrony Financial and I recently added to my position.

 

Synchrony Financial ($SYF) recently reported strong Q3 2018 results that beat the top- and bottom-line estimates. The market, however, was not impressed as shown by the fact that the stock was down by almost 10% since the earnings were released (yes, the broader market pullback also came into play). More recently, the stock took another leg down when it was announced that Walmart (WMT) was suing Synchrony over disputes related to the WMT credit-card portfolio.

 

Notice the earnings-related and WMT-related drops over the last two weeks. While there are definitely risks that need to be considered, I believe that the recent pullback in SYF shares was overdone and that Synchrony Financial is still worthy of investment dollars, at least for the time being.

 

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