Synchrony Financial (NYSE:SYF), the credit card unit that was split off from General Electric Company (NYSE:GE) late last month, has been gaining for the last couple of days after more than two weeks of essentially no movement and no new information that would push the market one way or the other. The best guess for why it’s starting to rally now: analyst ratings are just around the corner.
IPO quiet period on Synchrony Financial ends September 9
“The 40 day quiet period on underwriter reports that began with the July 30 IPO of Synchrony Financial will conclude on September 8, allowing the IPO underwriters to publish analyses of the GE consumer financial services spin-off on September 9,” wrote Don Dion last Friday on SeekingAlpha, predicting this week’s rally.
Of course this is something that always happens to some extent. You wouldn’t expect an underwriter to start dogging a stock that it has just taken a very active role in selling, and analyst ratings inevitably influence investor decisions. But in the case of Synchrony Financial (NYSE:SYF) it has a lot of major banks behind it: Citigroup Inc. (NYSE:C), Goldman Sachs Group Inc (NYSE:GS), Morgan Stanley (NYSE:MS), Barclays PLC (NYSE:BCS) (LON:BARC), and Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DB) are just a handful of the IPO underwriters that will mostly start releasing positive ratings about two weeks from now. Add in the fact that the stock hardly moved from its IPO price for a couple of weeks and the effect of the 40-day quiet period is fairly clear, as opposed to getting drowned out by other market noise.
BTIG has set a $30 price target, others will likely follow suit
One company we’ve already heard from is BTIG, which initiated coverage on Synchrony Financial (NYSE:SYF) with a Buy rating and a $30 price target representing a 12x multiple on 2016E EPS, citing strong visibility into future revenues. In the short term, a slew of similar recommendations will probably give Synchrony Financial a boost in price from its current $25 level. In the longer term, there are concerns that in order to become the world’s largest private label credit card issuer (by purchase volume and receivables), Synchrony may have had to lower its credit quality standards, a decision that could come back to haunt investors down the line.