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.