Investment bank Morgan Stanley (MS) has expressed optimism about the U.S. consumer credit market, pointing to stabilizing default rates and a favorable economic environment. Analysts, led by Jeffrey Adelson, anticipate sustained growth for consumer credit companies in 2025, driven by easing inflation, positive real wage growth, lower interest rates, and responsible lending practices.
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Further, the analysts expect a more relaxed regulatory climate under the incoming Donald Trump administration, with reduced scrutiny from the Consumer Financial Protection Bureau (CFPB). Importantly, MS expects that the CFPB’s rule, which caps credit card late fees charged by large card issuers to $8, will not be implemented, which would benefit the credit card companies.
Based on this positive outlook, Morgan Stanley has upgraded ratings and raised target prices for several consumer finance companies. Let’s take a closer look at these changes.
- Synchrony Financial (SYF) – Synchrony provides credit cards, savings products, and financing solutions. MMS double upgraded the rating on SYF stock to Buy from Sell and raised the price target to $82 (implying 27.6% upside potential) from $40.
- Ally Financial (ALLY) – Ally is a digital financial services company that provides banking, auto financing, and investment services. The investment bank maintained a Buy rating on ALLY stock and raised the price target to $42 (21.3% upside) from $41.
- American Express (AXP) – AXP is a global financial services company known for its credit cards. Morgan Stanley raised the stock’s price target to $305 (4.1% upside) from $252 and maintained a Hold rating.
- SLM Corp. (SLM) – SLM is a financial services company specializing in private student loans. The price target for SLM stock was raised to $32 (reflecting an upside of 16.5%) from $26 while maintaining a Buy rating.
- SoFi Technologies (SOFI) – SOFI offers student loan refinancing, personal loans, mortgages, and investment services. Morgan Stanley raised the price target to $13 from $7.50, driven by expected growth in fee income. However, the firm maintained a Sell rating on SOFI stock.
Overall, the investment bank’s positive outlook for the consumer finance sector reflects a growing optimism about the overall economic environment.
What Is the Best Financial Stock to Buy?
Among the above-mentioned stocks, SLM has a Strong Buy consensus rating, while AXP, ALLY, and SYF have a Moderate Buy, and SOFI stock has a Hold rating. Looking ahead, analysts forecast the highest upside potential of 19.7% for ALLY stock, with SYF following at 7%.
