Synchrony Financial’s SWOT analysis: stock outlook amid Walmart deal, credit trends

Synchrony Financial (NYSE:SYF), a leading consumer financial services company, has been making headlines with its new partnership with Walmart (NYSE:WMT) and improving credit quality trends. Trading near its InvestingPro Fair Value with an "GREAT" Financial Health score of 3.02 out of 4, the company has demonstrated strong momentum with a 46% return over the past year. As the company navigates a complex economic landscape, investors are closely watching its performance and future prospects. This comprehensive analysis delves into Synchrony’s recent developments, financial performance, and market position to provide a clear picture of its current state and future potential.

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Company Overview and Recent Developments

Synchrony Financial specializes in private label credit cards, installment loans, and consumer financing solutions. The company’s recent partnership with Walmart marks a significant milestone, as Synchrony is set to become the main card issuer for the retail giant. This development comes after Capital One (NYSE:COF)’s termination of its partnership with Walmart, presenting Synchrony with a substantial opportunity to expand its market presence.

The Walmart partnership is expected to enhance customer acquisition dynamics and yield higher returns compared to Synchrony’s previous program with the retailer, which ended in 2018. While Synchrony cannot directly market to existing Walmart cardholders, analysts project that this could potentially become a top 5 program for the company in the future.

Financial Performance and Credit Quality

Synchrony’s financial performance has shown resilience in the face of economic challenges. Trading at a P/E ratio of 8.13, the company reported $7.27 in diluted EPS over the last twelve months. Looking forward, the company’s earnings per share (EPS) for the fiscal year 2025 are estimated at $7.98, with projections for 2026 reaching $8.81. These figures represent a slight upward adjustment from previous estimates, reflecting the company’s ability to navigate market uncertainties.

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Credit quality has been a bright spot for Synchrony, with delinquency rates (DQs) and net charge-offs (NCOs) performing better than expected. The company reported lower-than-anticipated credit losses for April and May 2025, suggesting effective risk management strategies. The quarter-to-date NCO average stood at 5.75%, compared to the second quarter of 2025 estimates of 6.14% for the Street consensus.

Loan Growth and Market Position

Despite positive developments in credit quality, Synchrony has experienced a slowdown in loan growth. As of the latest reports, loan growth declined by 2.4% year-over-year, compared to a 2.1% decline in the previous month. This deceleration has raised some concerns among analysts about potential challenges in expanding the company’s loan portfolio.

Synchrony’s market position remains strong, with a precise market capitalization of $22.78 billion as of June 2025. The stock has shown significant momentum, trading between $40.55 and $70.93 over the past 52 weeks, with average daily trading volume of 4.44 million shares. The company’s ability to secure high-profile partnerships, such as the one with Walmart, demonstrates its competitive edge in the consumer finance sector.

Strategic Initiatives and Industry Trends

Synchrony has been proactive in adapting to evolving industry trends, particularly in the Buy Now, Pay Later (BNPL) space. The company’s in-house BNPL platform has been gaining traction, with a presence at 20% of surveyed partners, including a significant partnership with Lowe’s (NYSE:LOW). This strategic move positions Synchrony to compete effectively in the growing BNPL market.

Moreover, Synchrony’s partnership with Atlanticus’ Fortiva card offers a second-look option that broadens its consumer underwriting capabilities. This initiative enhances partner value through higher customer conversion rates, allowing Synchrony to capture a wider range of consumers.

Future Outlook and Guidance

Looking ahead, Synchrony has reiterated its full-year 2025 guidance, signaling confidence in its business model and growth strategies. The company has maintained dividend payments for 10 consecutive years, with a current yield of 2.01% and impressive dividend growth of 20% over the last year. Analysts anticipate a shift in growth expectations to the second half of 2025, with potential for stronger trends as consumer confidence improves.

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The company’s long-term prospects appear promising, with some analysts projecting that Synchrony could achieve an EPS of around $9 per share by fiscal year 2026. This optimistic outlook is based on the company’s strategic partnerships, improving credit trends, and potential for market expansion.

Bear Case

How might slowing loan growth impact Synchrony’s revenue?

The deceleration in loan growth, with recent figures showing a 2.4% year-over-year decline, could pose challenges for Synchrony’s revenue generation. As loan portfolios are a primary source of income for financial services companies, continued slowdown may lead to reduced interest income and potentially impact overall profitability. If this trend persists, Synchrony may need to explore alternative revenue streams or implement aggressive growth strategies to maintain its financial performance.

What risks does macroeconomic uncertainty pose to Synchrony’s performance?

Macroeconomic uncertainty remains a significant concern for Synchrony and the broader consumer finance sector. Economic factors such as inflation, interest rate fluctuations, and potential recessionary pressures could affect consumer spending habits and credit utilization. In an environment of economic instability, consumers may become more cautious with credit usage, potentially leading to reduced transaction volumes and increased credit risk. This could result in higher provisioning for loan losses and impact Synchrony’s bottom line.

Bull Case

How could the new Walmart partnership drive growth for Synchrony?

The newly established partnership with Walmart presents a substantial growth opportunity for Synchrony. As one of the world’s largest retailers, Walmart offers access to a vast customer base and significant transaction volumes. This partnership could potentially become a top 5 program for Synchrony, driving new account acquisitions and increasing credit card usage. The collaboration may also provide Synchrony with valuable consumer data and insights, enabling more targeted marketing and product development strategies.

What potential does Synchrony’s in-house BNPL platform have?

Synchrony’s in-house Buy Now, Pay Later (BNPL) platform demonstrates the company’s adaptability to evolving consumer preferences and market trends. With BNPL options gaining popularity, especially among younger consumers, Synchrony’s platform could capture a significant share of this growing market. The presence of Synchrony’s BNPL solution at 20% of surveyed partners, including major retailers like Lowe’s, indicates strong adoption potential. This initiative could diversify Synchrony’s revenue streams, attract new customers, and strengthen relationships with existing retail partners.

SWOT Analysis

Strengths:

• Strong partnerships with major retailers, including new Walmart deal
• Improving credit quality trends
• Established market position in consumer financial services
• Diversified product offerings, including BNPL platform

Weaknesses:

• Slowing loan growth
• Dependence on consumer spending patterns
• Exposure to credit risk in uncertain economic conditions

Opportunities:

• Expansion of Walmart partnership
• Growth in BNPL market
• Potential for technological innovations in financial services
• Cross-selling opportunities within existing customer base

Threats:

• Increasing competition in BNPL space
• Macroeconomic uncertainties affecting consumer behavior
• Regulatory changes in consumer finance sector
• Potential for economic downturn impacting credit quality

Analysts Targets

• JMP Securities: $68.00 (June 16th, 2025)
• Barclays: $62.00 (June 11th, 2025)
• Truist Securities: $63.00 (June 3rd, 2025)
• RBC Capital Markets: $73.00 (January 29th, 2025)
• JMP Securities: $79.00 (December 13th, 2024)

This analysis is based on information available up to June 16, 2025, and reflects the most recent data and analyst perspectives on Synchrony Financial’s performance and outlook.

InvestingPro: Smarter Decisions, Better Returns

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