Capital One Financial Corporation (NYSE:COF) is one of the stocks in Jim Cramer’s spotlight. During the episode, Cramer showed quite a bullish sentiment toward the company stock, as he said:
“Whenever the averages are near their all-time highs, even after today’s pullback, all sorts of people come out of the woodwork to claim that great stocks have become overvalued, but sometimes these stocks have a lot more room to run. Take Capital One Financial, the bank with a huge credit card business that we own for the Charitable Trust… Now, since we first bought this one for the trust on March 6, we’re already up over 28% but we’re sticking with it. Why? Because I think it’s got a tremendous growth story. It’s not done anywhere near here. The recent run is all about Capital One’s acquisition of Discover Financial in an all-stock deal valued at $35.3 billion…
In simple terms, this acquisition gives Capital One ownership of the Discover Global Network, allowing them to scale up to become a truly global payments platform… There’s a lot more going on here. For starters, Capital One expects to realize $1.5 billion in cost synergies from this deal in 2027. They see another $1.2 billion in network synergies… All told, management believes this deal’s going to boost their earnings per share by 15% once we get to 2027, and that is substantial. I mean, this is a bank, you usually don’t get that kind of growth. The Discover deal also creates new opportunities for Capital One… After this merger, the combined company is the largest credit card company as measured by outstanding customer balances…
… Put it all together, and it’s easy to see how capital stock could keep being rewarded with a higher price-to-earnings multiple. Right now, the stock sells for just 11 times next year’s earnings estimates, which makes it incredibly cheap versus American Express at 20 times earnings. I use Amex because it’s the closest comparison now that the Discover deal is closed…
So here’s the bottom line on this stock that, even though I know it’s about nitty gritty, but it is very exciting for me. Capital One stock has already had a major run this year, but that’s because the Discover acquisition is incredibly positive. So I’m betting the stock has a lot more room to run. Even though the stock’s within spitting distance of its all-time high, listen to me, I think it’s still way too cheap here at a mere 11 times next year’s earnings, and I think it is poised to have multiple years of outstanding growth.”
A smiling face of a customer as they make a deposit at this company’s branch.
Capital One (NYSE:COF) provides a range of banking services, including credit cards, loans, deposits, and online banking. The company serves individuals, small businesses, and commercial clients through both digital and physical channels.
While we acknowledge the risk and potential of COF as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than COF and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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