Synchrony Financial Has Risks To Its Story, But There Are Reasons To Stay Long

Jan. 14, 2019 6:39 AM ETSynchrony Financial (SYF)PYPL36 Comments
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WG Investment Research


  • Synchrony Financial's stock has underperformed the broader market over the last year.
  • The company is operating in a challenging business environment, but I believe that the risks are baked into the stock.
  • I am long Synchrony Financial and I plan to stay long the stock.
  • This idea was discussed in more depth with members of my private investing community, Going Long With W.G.. Start your free trial today »

Synchrony Financial's (NYSE:SYF) stock is down big over the last year, as SYF shares are now approaching levels not seen since the mid-2014 IPO.

ChartSYF data by YCharts

More recently, Synchrony's stock has been under pressure due to the loss of a major customer, Walmart (WMT), but I believe there are reasons to stay long SYF shares, even in today's "challenging" environment.

A Challenging Environment, A Possible Slowdown Adds Risk To The Story

The risks of a recession have increased over the last few months with the probability of a U.S. recession now at a six-year high.

Source: Bloomberg

The trade war and the U.S. shutdown have been the main discussion points over the last month, and rightfully so, but it is important to note that experts still expect for U.S. GDP growth to be over 2%.


While U.S. GDP growth is expected to slow in 2019 from the over 3% in 2018, in my opinion, an above 2% guide should be viewed as positive news. Moreover, consumer strength is important to Synchrony's business prospects so it is encouraging that the CCI reading is still well-above 100, even after the recent dip.


At the end of the day, even after factoring in a possible economic slowdown in 2019, I believe that there are legitimate reasons to stay long Synchrony's stock.

Reasons To Remain Long

Over the last two years, Synchrony's stock has been positively and negatively impacted by a few major factors:

  1. Asset Quality (negative) - As described here, the market has been concerned about Synchrony's deteriorating asset quality metrics, and rightfully so. The metrics - i.e., 30+ Days Past Due, Net Charge-Offs, 90+ Days Past Due, and Allowance - have each raised questions about the quality of Synchrony's asset portfolio.
  2. Walmart News (negative) - The
ChartSYF PE Ratio (TTM) data by YCharts

ChartSYF PE Ratio (TTM) data by YCharts

ChartSYF Shares Outstanding data by YCharts

This article was written by

WG Investment Research profile picture
Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long SYF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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