- Synchrony's (SYF -1.8%) 2019 EPS could drop as much as 13% if Walmart (NYSE:WMT) switches its branded credit-card to another company, writes Morgan Stanley analyst Betsy Graseck in a note, according to Bloomberg.
- Yesterday, Synchrony fell 5.3% on reports that Walmart is considering moving its credit-card partnership to Capital One (COF -1.4%) because of its "technology-forward" focus.
- Given SYF's 18-year partnership with Walmart, its strong technology for retail card issuers and infrastructure for retail card programs, SYF has the advantage, Graseck writes.
- BTIG analyst Mark Palmer agrees. SYF has has a solid position in helping retailers build mobile capabilities he writes. Last year, SYF bought GPShopper, which helps retailers develop mobile apps, and earlier acquired Payfone an identity authenticator in digital channels.
- "Given the risks and complexity involved in transferring a store-card program to a different issuer we believe COF would need to have a very significant advantage from a technology standpoint for WMT to justify a switch," Palmer wrote.
- Palmer has a $44 price target on SYF, which he rates a buy. He estimates
- Meanwhile, Compass Point analyst William Ryan sees a "more subdued" impact on SYF should it lose the WMT business. He estimates WMT represents about 8%-9% of SYF's consolidated revenue.
- Previously: Walmart credit card business up for bidding - report (July 12)