Payment services company Discover Financial Services (NYSE:DFS) isn’t the leader in the credit card market by any stretch. But apparently, it’s big enough to make it attractive to diversified banking company Capital One (NYSE:COF). Reports suggest that Capital One is planning to buy Discover, and if a deal ultimately goes through, it would put a lot of extra firepower in Capital One’s pocket.
Capital One is currently in the process of evaluating such a deal and might be releasing the full specifics as early as this Tuesday. It’s going to be a sizable acquisition if it does go through. Indeed, Discover has a market cap of around $28 billion. While Capital One is nearly twice the size at $52 billion, it’s still going to require a lot of resources to pull Discover into the Capital One umbrella. Plus, Capital One hasn’t engaged in significant acquisitions since 2012, when it bought ING Group’s online banking for $9 billion.
Further Modifications Afoot
The acquisition is an exciting proposition, but it’s not the only thing Capital One has in the works. It’s built new systems for its airport lounges: an online wait list and capacity tracker to let potential visitors know if there’s any room in the lounge and how long until they can get in themselves. Meanwhile, Capital One has been closing branches at a surprising clip lately, with four closures last week and another two planned for the state of Virginia.
Is Capital One a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on COF stock based on six Buys and 13 Holds assigned in the past three months, as indicated by the graphic below. After a 29.77% rally in its share price over the past year, the average COF price target of $142.82 per share implies 4.07% upside potential.
