What happened
Bread Financial Holdings (BFH 0.06%) had a great week, with its stock price up 22.2% from last Friday's close as of noon ET today, according to S&P Global Market Intelligence. The stock is trading at around $37 per share, down 44% year to date.
It outpaced all of the major indexes, as the Dow Jones Industrial Average was up 10.1%, the S&P 500 gained 7.9%, and the Nasdaq Composite jumped 6.3% over that same period.
So what
Bread Financial Holdings may not be familiar to many investors. That's because the company was formerly known as Alliance Data Systems, a leader in private-label and co-branded credit cards. It also had a separate loyalty business, LoyaltyOne, but spun it off in 2021. Alliance Data bought the buy now, pay later (BNPL) company Bread in 2020 and then took on that company's name in March 2022, so it is now called Bread Financial Holdings.
But other than the name change, it remains one of the leaders in private-label and co-branded cards, as well as BNPL.
NYSE: BFH
Key Data Points
The stock price jumped higher this week, mainly after the release of its third-quarter earnings, which beat consensus revenue expectations with $979 million, up 15% year over year, but trailed earnings estimates. The company posted $2.69 diluted earnings per share, down from $4.47 diluted EPS a year ago.
Net interest income and net interest margin, which increased from 18.9% to 19.9% year over year, were both up, while loan balances were 14% higher. Earnings were down due to higher expenses and provision for credit losses, among other factors.
Now what
Bread also got a boost on Friday when analysts at Credit Suisse raised its price target to $40 per share after the earnings report. Only a few weeks earlier, it had initiated coverage with a $38 per-share price target.
The company also added several new partners in the quarter, including Marqeta, to provide in-store payment solutions on its platform, AAA, and specialty retailer World Market.
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Macroeconomic conditions present some headwinds for Bread Financial, along with others in the space, but third-quarter gross domestic product (GDP) growth was a good sign, and we'll see what happens with inflation and interest rates.
CFO Perry Beberman said the company remains on pace to have low-double-digit loan growth and a year-over-revenue increase in 2022.
Further, with a forward price-to-earnings (P/E) ratio of just over 3, Bread is trading at a discount compared to others in the space. It is a good cheap stock that might be worth a look once there is some more visibility in the next few months.
