Synchrony Financial should experience ongoing tailwinds from PayPal ‘s plan to add its cards to Apple Wallet next year, Bank of America said Monday. “Synchrony is the issuer of both the PayPal and Venmo credit cards and combined, the two programs comprised over 10% of SYF’s total interest and fees in 2021,” wrote analyst Mihir Bhatia, as he retained the bank’s buy rating on the stock. “As consumers add these cards to their Apple Wallets, we expect consumer card usage will increase, which in-turn drives incremental purchase volume and receivable growth for SYF.” Bhatia called the stock a “hidden beneficiary” of the partnership, saying that he anticipates Synchrony rolling out promotional campaigns to convince customers to use these cards as their default. This should also translate to higher purchase volumes, he said. “Assuming the combined PayPal and Venmo portfolio comprises about 15% of total purchase volume, 5% of users make it top-of-wallet and these users get a 30% lift in spending, we estimate the change could provide a 20-25bps boost to SYF’s total purchase volumes,” Bhatia said. ” So the near-term financial impact is somewhat limited.” Shares are also trading attractively at under 7 times 2023 consensus earnings per share estimates, which accounts for any potentially higher credit losses in the quarters ahead, Bhatia said. Bank of America’s $39 price target suggests shares are positioned to rally as much as 11.4% from Friday’s close. The stock is down about 24.5% year to date. — CNBC’s Michael Bloom contributed reporting
