Discover stocks (NYSE:DFS) has gained nearly 18% since the start of the year, compared to a 16% rise in the S&P500 over the same period. Moreover, at its current price of $116 per share, it’s trading just under its fair value of $118 – Trefis’ estimate of Find out the financial evaluation. The credit card giant posted mixed results in the first quarter of 2023, with revenue beating consensus, but earnings not hitting the target. It reported net revenue of $3.75 billion — up 29% year-over-year. It was driven by a growth of 26% in net interest income and 47% in non-interest income. While the NII benefited from higher interest rates and increased outstanding loan balances, non-interest income increased due to improvements in discount and exchange income and loan fee income. On the cost front, provisions for credit losses increased from $154 million to $1.1 billion. As a result, adjusted net income fell 22% year over year to $939 million.
The company’s net revenue grew 10% year over year to $13.34 billion in fiscal 2022, primarily due to higher net interest income. However, the cap was somewhat offset by a 9% year-over-year decline in non-interest income due to a loss of $214 million in equity investments. However, Discover card purchase volume increased 16% in the year, indicating an improvement in consumer spending levels. On the expense side, the provisioning number saw an unfavorable increase, resulting in a 20% year-over-year decline in adjusted net income to $4.3 billion.
Going forward, we expect the Q2 result to be along the same lines as Q1. Notably, consensus estimates for Q2 2023 revenue and earnings are $3.88 billion and $3.68 billion, respectively. Total, Discover financial returns It’s expected to reach $15.56 billion in fiscal 2023. In addition, DFS’ adjusted net income is expected to remain at around $3.44 billion for the year. That combined with annualized EPS of $13.25 and a P/E multiple of just under 9x would result in a valuation of $118.
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