BofA analyst Mihir Bhatia notes that Walmart (WMT) sent Capital One (COF) a notice of termination of the credit card partnership agreement and filed a lawsuit to terminate the card program early and that Capital One said in an SEC filing that it disagrees that Walmart has the right to terminate the program early and will defend its contractual rights in court. The SEC filing states that if the court were to find in Walmart’s favor, the resulting transfer to a new issuer would occur no earlier than January 2025, so "on face value it appears 2023 and even 2024 estimates are still likely achievable and need not be adjusted," said the firm. However, the overhang from the lawsuit "could make it difficult to maximize the value of the partnership for both sides," added BofA, which would expect a negative reaction in Capital One shares on Monday. The firm maintains a Neutral rating on Capital One shares as it thinks the current valuation offers a balanced risk-reward.
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Read More on COF:
- Walmart (WMT) Takes Capital One to Court
- Capital One received credit card termination notice from Walmart
- Walmart sues to end credit-card partnership with Capital One, WSJ reports
- Capital One price target lowered to $110 from $115 at Wells Fargo
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