Skip to Content
US Videos

Alliance Data Systems Cashing In on Retailers' Struggles

This mildly undervalued narrow-moat firm should continue to enjoy a significant tailwind from store-branded credit cards.

Mentioned:

Colin Plunkett: We think narrow-moat-rated Alliance Data Systems is mildly undervalued. Currently the stock is trading at about a 10% discount to our fair value estimate.

We believe that as retailers struggle against competition from the likes of Amazon, they are much more likely to embrace offering store-branded credit cards for consumers. Retailers benefit in two big ways from offering store-branded credit cards. First, they are able to collect purchase data, enabling retailers to offer tailored marketing programs in the form of automated emails or mobile display ads for their cardholders. More importantly, retailers share in the revenue and late fees these cards offer. Income from these partnerships can really offset the anemic sales many retailers are experiencing. Really, the additional income stream is why we believe so many retailers have become enthusiastic in offering these cards.

Colin Plunkett does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.