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Capital One Stock Hits All-Time High: Should You Buy Now or Wait?
COFCapital One(COF) ZACKS·2025-02-21 16:35

Core Viewpoint - Capital One Financial Corporation (COF) is set to acquire Discover Financial Services Inc. (DFS) in a 35.3billionall−stocktransaction,aimingtoreshapethecreditcardindustryandunlockshareholdervalue[1][2].AcquisitionDetails−DiscoverFinancialshareholderswillreceive1.0192CapitalOnesharesforeachDiscovershare,withexpectedexpensesynergiesof35.3 billion all-stock transaction, aiming to reshape the credit card industry and unlock shareholder value [1][2]. Acquisition Details - Discover Financial shareholders will receive 1.0192 Capital One shares for each Discover share, with expected expense synergies of 1.5 billion and network synergies of 1.2billionby2027,leadingtoover151.2 billion by 2027, leading to over 15% accretion in adjusted non-GAAP EPS by 2027 [2]. Financial Performance - Capital One's net interest income (NII) is projected to grow at a compound annual growth rate (CAGR) of 6% from 2019 to 2024, with net interest margin (NIM) expanding to 6.88% in 2024 from 6.63% in 2023 [4]. - The company’s revenues have a five-year CAGR of 6.5%, and net loans held for investment recorded a CAGR of 4.3% during the same period [4]. Revenue Estimates - Zacks Consensus Estimates for upcoming quarters and years indicate revenues of 10.03 billion for the current quarter and 40.96billionforthecurrentyear,reflectingyear−over−yeargrowthestimatesof6.6840.96 billion for the current year, reflecting year-over-year growth estimates of 6.68% and 4.71% respectively [8]. Balance Sheet Strength - As of December 31, 2024, Capital One had total debt of 45.6 billion and cash and cash equivalents of 43.2billion,maintaininginvestment−gradelong−termseniordebtratings[9][10].−Thecommonequitytier1ratioandtotalcapitalratiowere13.543.2 billion, maintaining investment-grade long-term senior debt ratings [9][10]. - The common equity tier 1 ratio and total capital ratio were 13.5% and 16.4%, respectively, well above regulatory requirements [11]. Dividend and Share Repurchase - The company has maintained a dividend of 60 cents per share since a 50% increase in July 2021, with a dividend payout ratio of 17% [14]. - As of December 31, 2024, approximately 4.05 billion worth of shares remained available for repurchase [16]. Analyst Sentiment - The Zacks Consensus Estimate for 2025 and 2026 earnings has increased to 15.65and15.65 and 18.17 per share, indicating projected growth of 12.1% and 16.2% for those years [21][22]. Market Performance - Over the past six months, COF stock has risen 47.2%, outperforming the industry and major indices, indicating strong market performance [25].