- Discover Financial (NYSE:DFS) gains 1.5% in premarket trading after BofA Securities analyst Mihir Bhatia upgrades the stock to Buy from Neutral as the company's Q1 beat on most key metrics reflect its improved outlook for credit and capital return.
- Bhatia blames the shares' muted reaction last week, despite strong Q1 results, to potentially higher 2021 operating expenses and "lingering uncertainty" around when loan growth resumes.
- The analyst expects positive EPS revision cycle is likely; boosts 2021 EPS estimate by 51% and 2022 EPS estimate by 19%.
- Lifts price target to $120 from $109; compares with average Wall Street price target of $115.20.
- Bhatia's Buy rating compares with the Very Bullish Quant rating and aligns with the average Wall Street rating of Bullish (5 Very Bullish, 6 Bullish, 12 Neutral).