Capital One Stock Hits All-Time High: Should You Buy Now or Wait?

Core Viewpoint - Capital One Financial Corporation (COF) is set to acquire Discover Financial Services Inc. (DFS) in a $35.3 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 $1.2 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 $40.96 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 $43.2 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 $15.65 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].