Can Increased Buyback Plan Lift Capital One’s Shares?

Capital One Financial Corporation (COF) announced that its board of directors has approved an additional share buyback program of up to $5 billion of its common stock. The authorization is due to begin in the third quarter of 2022.

The company provides personal and commercial banking, credit cards, loans, savings and time deposits, treasury management and depository services.

The buyback plan will be carried out from time to time, depending on market, economic and other factors. Repurchases will be made using methods not limited to the open market or private transactions.

Stock Rating

Following the news, Wells Fargo analyst Donald Fandetti maintained a Buy rating on Capital One and lowered the price target to $165 from $180. The new price target implies 27.6% upside potential from current levels.

“While we understand investor concerns around the low-end consumer given higher energy prices, we believe strong wage growth and job availability are offsets,” the analyst said.

The rest of the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 13 Buys and five Holds. Capital One’s average price target of $173.93 implies 34.5% upside potential to current levels.

Hedge Fund Trading Activity

TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Capital One is currently Negative, as the cumulative change in holdings across all 20 hedge funds that were active in the last quarter was a decrease of 846,900 shares.

Takeaway

Capital One’s shares have declined 12.5% so far this year. The move can be seen as an effort to control the falling share price, which has been wiping off shareholders’ wealth. The record-high share repurchase program might instill confidence in investors and provide a boost to the stock.

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