Pacific Crest Downgrades Alliance Data Systems (ADS) to Sector Weight
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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."
Shares of Alliance Data Systems closed at $216.99 yesterday.
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