Morgan Stanley has adjusted its price target for Bread Financial (BFH, Financial), increasing it from $33 to $36. This revision follows the company's recent quarterly earnings report. Despite the price target uplift, the firm maintains an Underweight rating on BFH shares.
The decision to boost the price target stems from improved expectations concerning loan losses and strategic share repurchases, which are projected to enhance earnings per share in 2025 and 2026. Morgan Stanley analyst Jeffrey Adelson highlighted these factors as contributing to the brighter outlook for Bread Financial's future profitability.
However, Morgan Stanley remains cautious about potential challenges on the horizon. The firm cites uncertainties related to macroeconomic conditions and tariffs, along with a slight uptick in unemployment rates, as concerns that could impact subprime and retail credit card net charge-offs. These factors suggest a careful approach to the forward view of Bread Financial's stock performance.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 13 analysts, the average target price for Bread Financial Holdings Inc (BFH, Financial) is $60.09 with a high estimate of $88.00 and a low estimate of $33.00. The average target implies an upside of 23.46% from the current price of $48.67. More detailed estimate data can be found on the Bread Financial Holdings Inc (BFH) Forecast page.
Based on the consensus recommendation from 16 brokerage firms, Bread Financial Holdings Inc's (BFH, Financial) average brokerage recommendation is currently 2.7, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Bread Financial Holdings Inc (BFH, Financial) in one year is $40.98, suggesting a downside of 15.8% from the current price of $48.67. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Bread Financial Holdings Inc (BFH) Summary page.
BFH Key Business Developments
Release Date: January 30, 2025
- Revenue: $3.8 billion for the full year 2024, a decrease of 11% year-over-year.
- Adjusted Income from Continuing Operations: $21 million for the fourth quarter.
- Adjusted Diluted EPS from Continuing Operations: $0.41 for the fourth quarter.
- Tangible Book Value per Share: $46.97, a 7% increase year-over-year.
- Common Equity Tier 1 Capital Ratio: 12.4%, increased by 20 basis points year-over-year.
- Credit Sales: $27 billion for the full year 2024, a decrease of 7% year-over-year.
- Average Loans: $18.1 billion for the full year 2024, a decrease of 1% year-over-year.
- Fourth Quarter Credit Sales: $7.9 billion, an increase of 1% year-over-year.
- Fourth Quarter Revenue: $0.9 billion, a decrease of 9% year-over-year.
- Net Loss Rate: 8.0% for the fourth quarter, flat year-over-year.
- Delinquency Rate: 5.9% for the fourth quarter, down 60 basis points year-over-year.
- Direct-to-Consumer Deposits: $7.7 billion at quarter end, accounting for 43% of average total funding.
- Loan Yield: 25.7% for the fourth quarter, decreased by 200 basis points year-over-year.
- Net Interest Margin: 17.8% for the fourth quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bread Financial Holdings Inc (BFH, Financial) added iconic brand partners such as Hard Rock International, HP, and Saks Fifth Avenue, enhancing its portfolio and securing over 85% of its loans through 2026.
- The company successfully reduced its parent level debt by 50% since 2021, achieving a double leverage ratio target of below 115%.
- BFH's balance sheet improvements led to Moody's and Fitch upgrading their rating outlooks from stable to positive.
- The company achieved all its 2024 full-year targets despite a challenging macroeconomic environment, demonstrating operational resilience.
- BFH's direct-to-consumer deposits grew to $7.7 billion, improving its overall funding mix and providing a strong foundation for future growth.
Negative Points
- Credit sales decreased by 7% year-over-year, reflecting moderated consumer spending and proactive credit tightening actions.
- Revenue declined by 11% due to lower finance charges and late fees, as well as reduced merchant discount fees from lower big-ticket sales.
- The net loss rate remained elevated at 8.0%, with expectations of continued high loss rates in the first half of 2025.
- Loan yield decreased by 200 basis points year-over-year, impacted by lower finance charges and a shift in product and risk mix.
- The company faces ongoing economic and political uncertainties, including potential impacts from key legislative and monetary policies.
