Capital One Stock Rises After Bank Of America Upgrades Shares On DFS Acquisition: Retail Stays Bullish
Synopsis
According to TheFly, Bank of America believes Capital One is well-positioned to benefit from the pending Discover Financial Services acquisition, which should unlock near-term benefits and provide meaningful strategic and operational upside in the longer term.
Shares of Capital One Financial Corp (COF) rose over 2% on Wednesday after Bank of America upgraded the stock to ‘Buy’ from ‘Neutral’ while raising the price target to $235 from $207.
According to TheFly, Bank of America believes Capital One is well-positioned to benefit from the pending Discover Financial Services (DFS) acquisition, which should unlock near-term benefits and provide meaningful strategic and operational upside in the longer term.
The brokerage believes the combined company could earn mid-teens-plus returns on equity, which could also lead to a multiple expansion.
According to a CNBC report, Bank of America analyst Mihir Bhatia indicated that the acquisition would “fundamentally alter” Capital One’s standing in the payments space led by the access to Discover’s closed-loop network.
“A combination of Improving credit trends, pending acquisition-related revenue, and expense synergies as well as the potential for increased capital returns provide a cascade of catalysts that should excite investors and can provide near-term upside to Street estimates,” Bhatia said, according to the report.
In February 2024, Capital One announced its intent to acquire Discover in an all-stock transaction valued at $35.3 billion. The company stated then that Discover shareholders would receive 1.0192 Capital One shares for each Discover share.
Upon consummation of the deal, Capital One shareholders will own approximately 60% and Discover shareholders will own approximately 40% of the combined company, it had said.
On Stocktwits, retail sentiment surrounding Capital One continued to trend in the ‘bullish’ territory (57/100) while sentiment trended in the ‘neutral’ zone for DFS.
Both COF and DFS shares have gained over 15% in 2025. Over the past year, COF has risen over 50%, while DFS has gained over 61%.
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