BFH Stock Forecast & Price Target

Bread Financial Holdings, formed from the merger of JCPenney's credit card processing unit and The Limited's credit card bank business, has shown a solid financial performance, evidenced by a sequential increase in net interest income by 6.0%, reaching $1.032 billion. The company is well-positioned for future growth, particularly through attracting new retail partners and expanding its buy now, pay later (BNPL) initiatives, which are expected to drive revenue and receivables upward in a positive economic environment. Additionally, with a focus on managing credit costs effectively, Bread Financial is anticipated to see improved loan growth and stable credit trends, which could enhance its overall valuation over time.

The negative outlook on Bread Financial Holdings's stock is primarily driven by a decline in key financial metrics, including a 4.2% decrease in total revenues sequentially and a 1.1% decrease year-over-year down to $929 million. Additionally, the company reported a drop in net interest income of 3.2% sequentially and 1.3% year-over-year, culminating in a net interest margin reduction of approximately 40 basis points to 17.7%. Compounding these issues, management has forecasted losses of between 7.4% to 7.5% for the upcoming third quarter, indicating ongoing challenges in their financial performance.