Capital One Financial may be poised for gains in the path ahead with its acquisition of Discover, according to Evercore ISI. The firm upgraded the financial service stock to outperform from in line. and its $200 price target implies 20.9% upside from Tuesday’s close. Capital One has struggled in the new year, falling more than 7%. Over the past month, it has tumbled nearly 16%. The S & P 500, by comparison, has pulled back more than 5% year to date and about 8% in the past month. COF 1M mountain COF, 1-month “We believe the stock’s valuation does not fully discount L/T upside to earnings and returns driven by the combined Capital One/Discover franchise,” analyst John Pancari wrote in a note. “We acknowledge that risks persist – including signs of a weakening U.S. consumer, delay in DFS deal close, potentially higher business investment, and recent COF share outperformance. However, in our view, the shares still offer meaningful upside despite these factors.” Capital One announced its $35.3 billion acquisition of Discover last year, and Pancari expects the deal to close in the second quarter of 2025. While the analyst revised his 2025 and 2026 earnings estimates slightly lower and offered a more conservative 2027 outlook, he anticipates a compound annual growth rate of 17.7% in earnings per share as well as a 19.5% return on tangible common equity by 2027. “A weaker U.S. consumer could pressure card credit & spend trends, but COF’s idiosyncratic factors provide upside earnings optionality in the face of potential credit & revenue headwinds,” he also wrote. “While a possible delay in DFS deal close and potentially higher network & regulatory/compliance investments pose risk to accretion, our forecasts are notably conservative due to these factors.” Pancari’s view of the stock puts him in the majority of those who cover Capital One. To be exact, 12 out of 22 analysts in total have a strong buy or buy rating on Capital One, according to LSEG data. The average price target implies more than 33% upside ahead. The stock rose 1.5% in premarket trading on Wednesday on the back of Pancari’s upgrade.
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