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Capital One Financial (COF)
NYSE:COF

Capital One Financial (COF) AI Stock Analysis

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Capital One Financial

(NYSE:COF)

73Outperform
Capital One Financial presents a stable investment opportunity with strong revenue growth and solid financial management. While technical indicators signal caution, the valuation remains reasonable. The balanced sentiment from the earnings call, highlighting both strengths and challenges, supports a moderately positive outlook.
Positive Factors
Credit Conditions
The continued decline in card delinquency rates and now declining net charge-offs indicate improving credit conditions.
Financial Performance
Improved credit performance led to better-than-expected results, beating consensus estimates.
Mergers and Acquisitions
The merger with Discover Financial Services received approval and will be completed, indicating strategic growth.
Negative Factors
Market Sentiment
Shares of COF / DFS are down 8.9%/7.4% amidst fears that macro uncertainty will lead to a weaker consumer and higher credit losses.
Regulatory Actions
The FDIC ordered DFS to distribute $1.2B in restitution to affected merchants and assessed a $150M civic penalty on Discover related to the misclassification issue.

Capital One Financial (COF) vs. S&P 500 (SPY)

Capital One Financial Business Overview & Revenue Model

Company DescriptionCapital One Financial Corporation (COF) is a leading financial services company headquartered in McLean, Virginia. It operates primarily in the consumer and commercial banking sectors, offering a wide range of financial products and services. These include credit cards, auto loans, banking, and savings accounts, as well as commercial banking solutions. Capital One is well known for its credit card offerings, which cater to a broad spectrum of consumers, from those with excellent credit to those looking to rebuild their credit history.
How the Company Makes MoneyCapital One makes money through various revenue streams, primarily driven by its credit card business, which generates revenue from interest charges on outstanding balances and fees, such as annual fees, late payment fees, and transaction fees. The company also earns interest income from its consumer and commercial banking operations, including auto loans and other lending products. Additionally, Capital One generates revenue from deposits, where it benefits from the spread between the interest it pays on deposits and the interest it earns from lending activities. The company also engages in partnerships, for instance with retail brands, for co-branded credit card programs, which further contribute to its earnings by expanding its customer base and enhancing fee income. Capital One's business model is supported by its digital banking platform, which reduces operational costs and enhances customer acquisition and retention.

Capital One Financial Financial Statement Overview

Summary
Capital One Financial demonstrates robust revenue growth and a strong equity position, with improvements in leverage ratios. While profitability margins and cash flow growth have shown some decline, the company maintains a stable financial outlook. Continued focus on operational efficiency and cash flow generation would further strengthen its financial health.
Income Statement
75
Positive
Capital One Financial has shown strong revenue growth with a 25% increase from 2023 to 2024. The gross profit margin remains stable as total revenue equals gross profit, indicating effective cost management. However, net profit margin has declined slightly due to lower net income, and EBIT margin is low, suggesting room for improvement in operational efficiency. Overall, revenue growth is a strong positive, offset by lower profitability margins.
Balance Sheet
80
Positive
The company exhibits a solid equity ratio at approximately 12.4%, indicating a sturdy financial foundation. The debt-to-equity ratio has improved significantly as total debt was reduced to zero by 2024, demonstrating robust financial management. Return on equity is healthy at around 7.8%, although slightly lower than prior years, reflecting a minor decline in net income versus equity. Overall, the balance sheet reflects strong equity position and improved leverage.
Cash Flow
70
Positive
The cash flow analysis indicates a decrease in free cash flow compared to the previous year, but operating cash flow remains strong. The free cash flow to net income ratio is high, suggesting effective cash generation relative to earnings. However, the decrease in free cash flow growth rate from 2023 to 2024 is a concern. Overall, cash flow stability is maintained, but growth momentum has slowed slightly.
Breakdown
Dec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
39.11B36.79B34.25B30.43B28.52B
Gross Profit
46.03B25.77B34.25B30.43B28.52B
EBIT
11.60M-4.00M13.36B15.80B3.20B
EBITDA
11.60M0.00-4.00M-4.00M-3.00M
Net Income Common Stockholders
4.75B4.89B7.36B12.39B2.71B
Balance SheetCash, Cash Equivalents and Short-Term Investments
86.04B43.30B107.78B117.01B140.95B
Total Assets
490.14B478.46B455.25B432.38B421.60B
Total Debt
44.99B49.32B47.83B42.27B39.87B
Net Debt
-3.03B6.02B16.98B20.52B-638.00M
Total Liabilities
429.36B420.38B402.67B371.35B361.40B
Stockholders Equity
60.78B58.09B52.58B61.03B60.20B
Cash FlowFree Cash Flow
18.16B19.61B12.88B11.61B15.99B
Operating Cash Flow
18.16B20.57B13.81B12.31B16.70B
Investing Cash Flow
-26.41B-21.92B-29.74B-31.50B-14.84B
Financing Cash Flow
8.17B13.84B25.13B474.00M25.16B

Capital One Financial Technical Analysis

Technical Analysis Sentiment
Positive
Last Price182.73
Price Trends
50DMA
177.94
Positive
100DMA
183.39
Negative
200DMA
167.87
Positive
Market Momentum
MACD
0.10
Negative
RSI
58.11
Neutral
STOCH
85.03
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For COF, the sentiment is Positive. The current price of 182.73 is above the 20-day moving average (MA) of 168.07, above the 50-day MA of 177.94, and above the 200-day MA of 167.87, indicating a bullish trend. The MACD of 0.10 indicates Negative momentum. The RSI at 58.11 is Neutral, neither overbought nor oversold. The STOCH value of 85.03 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for COF.

Capital One Financial Risk Analysis

Capital One Financial disclosed 31 risk factors in its most recent earnings report. Capital One Financial reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Capital One Financial Peers Comparison

Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
DFDFS
78
Outperform
$46.51B9.8828.31%1.51%9.42%128.55%
SYSYF
74
Outperform
$19.57B7.1318.60%1.94%1.22%4.96%
AXAXP
74
Outperform
$179.05B18.2234.02%1.06%8.45%17.89%
COCOF
73
Outperform
$69.98B15.547.90%1.31%6.69%-6.76%
BABAC
73
Outperform
$273.39B11.199.46%2.57%7.23%16.15%
CC
64
Neutral
$116.02B10.376.33%3.23%2.97%88.51%
63
Neutral
$12.31B9.557.88%79.24%12.71%-4.71%
* Financial Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
COF
Capital One Financial
182.73
39.38
27.47%
AXP
American Express
264.81
28.56
12.09%
BAC
Bank of America
39.69
3.05
8.32%
C
Citigroup
68.43
8.25
13.71%
DFS
Discover Financial Services
184.86
59.19
47.10%
SYF
Synchrony Financial
51.42
7.57
17.26%

Capital One Financial Earnings Call Summary

Earnings Call Date:Apr 22, 2025
(Q1-2025)
|
% Change Since: 7.36%|
Next Earnings Date:Jul 17, 2025
Earnings Call Sentiment Neutral
Capital One's earnings call highlighted strong financial performance, improved credit metrics, and strategic progress with the Discover acquisition. However, challenges such as revenue decline, increased noninterest expenses, and specific segment challenges were noted. The overall sentiment is balanced with significant achievements and areas of concern.
Q1-2025 Updates
Positive Updates
Strong Financial Performance
Capital One reported Q1 earnings of $1.4 billion, or $3.45 per diluted common share, with adjusted earnings per share of $4.06. Pre-provision earnings were largely flat at $4.1 billion, and adjusted pre-provision earnings increased by 2% from the previous quarter.
Improved Credit Performance
The provision for credit losses decreased by $273 million compared to the prior quarter, with a decrease driven by $148 million lower net charge-offs and a $123 million larger reserve release.
Allowance Release
Capital One released $368 million in allowance this quarter, bringing the allowance balance to $15.9 billion. The total portfolio coverage ratio decreased by 5 basis points to 4.91%.
Liquidity and Capital Position
Total liquidity reserves increased to $131 billion, with the cash position ending at approximately $49 billion. The preliminary average liquidity coverage ratio during the first quarter was 152%, and the common equity Tier 1 capital ratio ended the quarter at 13.6%.
Domestic Card Business Growth
The Domestic Card business delivered top-line growth with year-over-year purchase volume growth of 5% (6% adjusted for leap year), and revenue was up 7% from the first quarter of 2024.
Auto Business Performance
Auto originations were up 22% from the prior year quarter, with ending loan balances increasing by $3.8 billion or about 5% year-over-year.
Discover Acquisition Progress
Capital One received regulatory approval for the acquisition of Discover, with the transaction expected to close on May 18. The acquisition is expected to create a leading consumer banking and payments platform.
Negative Updates
Revenue Decline
Revenue in the linked quarter declined by 2% due to two fewer days in the quarter.
Increase in Noninterest Expense
Domestic Card noninterest expense increased by 13% compared to the first quarter of 2024, driven by higher operating expense and marketing costs.
Commercial Banking Challenges
First quarter revenue in the Commercial Banking segment was down 7% from the linked quarter, and non-interest expense decreased by about 6%.
Charge-Off Rate Increase
The charge-off rate for the Domestic Card segment was 6.19%, up 25 basis points year-over-year, largely impacted by the end of the Walmart loss sharing agreement.
Company Guidance
During the Capital One Q1 2025 earnings call, guidance was provided that included several key metrics and expectations. Capital One reported first-quarter earnings of $1.4 billion, or $3.45 per diluted common share. Adjusted earnings per share stood at $4.06 after accounting for legal reserve activities and Discover integration expenses. The company's pre-provision earnings were $4.1 billion, stable sequentially, with a 2% increase on an adjusted basis. Revenue saw a 2% decline due to fewer days in the quarter, whereas noninterest expenses fell by 5% adjusted, driven by lower marketing and operating costs. The provision for credit losses decreased to $2.4 billion, with a reduction of $273 million from the previous quarter, attributed to $148 million in lower net charge-offs and a $123 million larger reserve release. The allowance balance was reduced by $368 million, resulting in a total coverage ratio decrease of 5 basis points to 4.91%. Liquidity reserves were up to $131 billion, with a cash position increase to $49 billion. The net interest margin was reported at 6.93%, and the common equity Tier 1 capital ratio rose to 13.6%, with future expectations for synergies from the Discover acquisition to be achieved over 24 months post-closing.

Capital One Financial Corporate Events

Financial Disclosures
Capital One Releases March 2025 Financial Metrics
Neutral
Apr 22, 2025

Capital One Financial Corporation released its monthly charge-off and delinquency metrics for March 2025. The report highlights the company’s financial health, with specific metrics on net charge-offs and delinquency rates for its credit card and auto loan segments, providing insights into its operational performance and potential impacts on stakeholders.

Spark’s Take on COF Stock

According to Spark, TipRanks’ AI Analyst, COF is a Neutral.

Capital One Financial shows strong revenue growth and a solid equity position, which are the primary factors supporting its stock score. The technical indicators suggest a cautious outlook with the stock trading below key moving averages. While the valuation appears reasonable, mixed results from the earnings call and the corporate events highlight both opportunities and challenges ahead. The merger with Discover is a strategic positive, poised to enhance market positioning. However, ongoing operational challenges, particularly in credit card charge-offs, warrant attention.

To see Spark’s full report on COF stock, click here.

Other
Capital One Financial to Attend UBS Conference 2025
Neutral
Feb 10, 2025

Capital One Financial Corporation announced its participation in the 2025 UBS Financial Services Conference in Miami, Florida, scheduled for February 11, 2025. The presentation will be accessible via a live audio webcast on the company’s website, with a replay available until February 24, 2025, highlighting the company’s engagement with investors and stakeholders.

Executive/Board Changes
Capital One Approves 2025 Executive Compensation Plans
Neutral
Feb 7, 2025

On February 4, 2025, Capital One’s Board of Directors approved the 2025 compensation plans for CEO Richard D. Fairbank and other executives, aligning their incentives with company performance. The 2025 plan includes performance-based awards and deferred incentives, emphasizing long-term shareholder value, and continues the practice of no cash salary for Mr. Fairbank.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.