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Friday, 12/05/2014 7:38:45 AM

Friday, December 05, 2014 7:38:45 AM

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Synchrony Financial’s Stock Could Soar After GE’s Exit, Analyst Says
Nov 25, 2014 6:35 pm ET By MAUREEN FARRELL

Click For wsj.com Link



Goh Seng Chong



Synchrony Financial investors shouldn’t fear the company’s freedom from General Electric Co.

Synchrony, the private-label credit-card issuer that went public in July, is poised to see its stock move significantly higher after rising 25% since the company went public at $23 per share in July. Investors shouldn’t worry about any adverse effects when GE, which still owns roughly 82% of the company, sells the remainder of its stake, Bernstein Research analyst Kevin St. Pierre wrote in a report.

“While the stock could face pressure in the period before and after the exchange, we believe the long-term effect will be negligible on [Synchrony's] valuation,” Mr. St. Pierre wrote. GE has said it expects to exit its entire position in 2015.

After a split from GE, Synchrony could consider returning capital to shareholders. The company, Mr. St. Pierre wrote, needs to formally separate from GE before doing that. Synchrony is well-capitalized and should be able to get clearance from regulators for a capital return program, he said.

In a statement, Synchrony Financial wrote: “We are not seeking to return capital prior to separation. Post separation, we would look to return capital, subject to regulatory and other considerations.”

Bernstein has a $35 price target on Synchrony Financial–21% above where the company’s stock currently trades.

Mr. St. Pierre said larger trends should benefit Synchrony, notably the overall growth in private-label cards. “We expect more significant purchases will be placed on the card than at any point over the last three decades,” he wrote in the report.

General Electric raised $2.88 billion when Synchrony went public. Since then, GE’s stock is up more than 6%.




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