Pacific Crest Downgrades Alliance Data Systems (ADS) to Sector Weight
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Rating Summary:
14 Buy, 21 Hold, 2 Sell
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Pacific Crest downgraded Alliance Data Systems (NYSE: ADS) from Overweight to Sector Weight and removed its price target. Analyst Josh Beck said he is slightly more cautious due to credit trends.
"We believe in the ADS data advantage; however, we are tilting our stock bias neutral given recent credit trends, particularly rising early-stage delinquencies. We are applying slightly more conservative credit metrics, which takes our 2017 EPS outlook down to $18.50. We are downgrading to Sector Weight and would look for a better entry point before increasing exposure," said Beck.
The analyst added, "Delinquency at ADS has increased by 50 basis points y/y year-to-date and 70 basis points y/y over the past three months, which prompts a slightly more cautious stance. To be clear, we are projecting a simple credit cycle normalization, not a severe correction, to which ADS is over-indexed because of outsized growth. ADS has grown credit receivables at a CAGR of ~20% since 2010 versus the overall market at ~2%. As expected, the privatelabel-market Equifax Risk score has decreased 1% per annum to 689 due to normal credit box expansion."
For an analyst ratings summary and ratings history on Alliance Data Systems click here. For more ratings news on Alliance Data Systems click here.
Shares of Alliance Data Systems closed at $216.99 yesterday.
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