While consumer finance operation Discover Financial Services (NYSE:DFS) isn’t necessarily set to sell off its student loan business, just the idea of it was enough to inspire investors. Investors were sufficiently inspired, in fact, to push Discover’s share price up nearly 5% in Thursday afternoon’s trading.
Pick the best stocks and maximize your portfolio:
- Discover top-rated stocks from highly ranked analysts with Analyst Top Stocks!
- Easily identify outperforming stocks and invest smarter with Top Smart Score Stocks
If Discover wasn’t planning to go through with the sale before, it may well be planning to at this point. Barclays, via analyst Terry Ma, came out and noted that the move would prove a “modest positive” for Discover’s overall operations, with a 1.2% positive impact coming from the deal. That’s even after share buybacks come into play following such a move.
Ma points out that such a play would streamline DFS’ overall operations, and put more attention and resources on its card business, which is its key operation at this stage. Since Discover has right around $10.5 billion in student loans to its credit, and $866 million in reserve, that could fuel a good slug of buybacks indeed.
It’s Got Other Points to Its Credit, Too
That’s definitely a good bit of news for DFS investors. Still, there’s actually more than that afoot, based on another report. Discover has seen growth in its receivables, as well as its overall inflow of deposits. It’s been moving hard toward a digital transformation, raising its net interest margin, and more. Those factors combined should have plenty of impact on improving shareholder value and keeping investors interested in sticking with Discover Financial Services. Plus, there’s certainly something to be said for selling a book of active loans before the latest move from the Biden Administration somehow renders them impossible to collect.
Is Discover Financial Services a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on DFS stock based on seven Buys and 10 Holds assigned in the past three months, as indicated by the graphic below. After a 10.25% loss in its share price over the past year, the average DFS price target of $102.94 per share implies 10.38% upside potential.
