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Synchrony Financial SYF

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Morningstar’s Analysis

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Encouraging Credit Result From Synchrony Boosted by Expectations for Fiscal Stimulus

Michael Miller Equity Analyst

Analyst Note

| Michael Miller |

After extensive negotiations, U.S. lawmakers reached an eleventh-hour agreement on Dec. 20 on a $900 billion pandemic relief bill. While the package still needs to be passed, it is intended to include another round of stimulus checks, enhanced unemployment benefits, and an extension of the Paycheck Protection Program. We see no-moat Synchrony Financial as a beneficiary of any additional stimulus spending, as the company is exposed to the financial health of the American consumer and the level of retail sales. More relief spending should help retailers and mitigate some concerns of rising credit costs by providing financial support to Synchrony’s cardholders. However, any effect from increased fiscal stimulus will be short term, and our long-term thesis for the company is not materially altered. Our fair value estimate for Synchrony is $32.

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Company Profile

Business Description

Synchrony Financial, originally a spin-off of GE Capital's retail financing business, is the largest provider of private-label credit cards in the United States by both outstanding receivables and purchasing volume. Synchrony partners with other firms to market its credit products in their physical stores as well as on their websites and mobile applications. Synchrony operates through three segments: retail card (private-label and co-branded general-purpose credit cards), payment solutions (promotional financing for large ticket purchases), and CareCredit (financing for elective healthcare procedures).

777 Long Ridge Road
Stamford, CT, 06902
T +1 203 585-2400
Sector Financial Services
Industry Credit Services
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type High Yield
Employees 16,500