Investing

Is Something Big About to Happen To This Bank Stock?

Ian Cooper

Published: January 23, 2025 2:02 pm

Institutions are bullish on Capital One (NYSE:COF).

Late yesterday, a firm picked up $1.45 million worth of the COF February 21, 2025 210 calls. That tells us the firm is bullish, believing the underlying COF stock could test $210 ahead of that expiration date.

Key Points About This Article

• A firm picked up $1.45 million worth of the COF February 21, 2025 210 calls.
• There is now an increased likelihood Capital One could acquire Discover Financial this year. The deal, which could create one of the biggest credit card issuers in the U.S. had faced scrutiny under the Biden Administration.
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While the COF stock is a bit overbought, there are two key reasons it could push higher.

One, there is now an increased likelihood Capital One could acquire Discover Financial (NYSE:DFS) this year.  The deal, which could create one of the biggest credit card issuers in the U.S. initially faced scrutiny under the Biden Administration. However, with President Trump now in office, expectations for a favorable regulatory environment raise the chances for that acquisition.

Two, Capital One just posted solid earnings.

Earnings beat expectations. Revenue was in line. However, net interest income did fall short of expectations. Adjusted EPS of $3.09 beat expectations of $2.80. Total net revenue of $10.2 billion matched estimates and jumped from $10 billion quarter over quarter. Net interest income of $8.1 billion did miss estimates of $8.18 billion but increased from $8.08 billion in the prior quarter, and from $9.51 billion year over year.

“Our fourth quarter results included steady top-line growth in our domestic card business, strong originations and a return to loan growth in our auto business, and stable credit results across our businesses,” CEO Richard Fairbank said, as quoted by Reuters.

Analysts are Bullish on Capital One’s Upside

On Wednesday, RBC Capital analysts raised their price target on COF by $10 to $200. Barclays also upgraded Capital One to an overweight rating with a price target of $219.

According to Barclays, “We favor stocks with positive catalysts that have not been fully priced in and could drive additional upside,” Ma said. The upgrade for Capital One and Discover is due to the increased likelihood that their merger will proceed, better credit, and excess capital,” as quoted by Seeking Alpha.