Morgan Stanley analyst Jeff Adelson upgraded Bread Financial Holdings (NYSE: BFH) from Underweight to Equalweight with a price target of $91.00.

The analyst comments: "As a subprime consumer lender, credit trends are a key driving force in shares of BFH. Credit has positively surprised for several quarters now, with stronger late-stage roll rates driving lower credit losses YTD. If recent trends continue and coincide with ramping loan growth (target of low single digit growth in 2026), quarterly NCOs could have a 6% handle on it at some point in 2027. At this point, we are still modeling NCOs remaining well above pre-Covid levels, at 7.15% in 2027E vs. pre-Covid 6%+. However, there could be upside as BFH 1) has not been stepping into risk, with subprime mix of the loan book flat to slightly improving; 2) is underwriting to a higher income consumer with newer vintages seeing average incomes ~$95K vs. entire portfolio at ~$78K; and 3) is focused on signing up new partnerships with an emphasis on responsible growth. Upside could enter the equation via this year's larger tax refunds, although we'd note that higher gas prices would mostly wipe this benefit away if we stay above $4/gallon for the duration of the year.

BFH began stepping back into capital return more meaningfully in 2025. On Feb 26, BFH then announced an incremental $600M buyback authorization, increasing total capacity to $765M, and noted already having completed $75M QTD. BFH will also benefit from another 1.5M share reduction via termination of capped calls (previously in place to offset any dilution from now-retired converts). We are increasing 2026-27e buybacks by ~40% to ~$830M, which should in turn drive a 23% reduction in share count by YE27. Even with this large step up in buybacks at ~95% of 2026-27E, CET1 only shrinks 60bps to 12.4%, well within the company's long-term target of 12-13%. Note we layer in another $225M of preferred equity issuance in 2026 (vs. today's $70M), bolsters tier 1 capital by another ~100bps and helping enable a faster pace of buybacks. Average diluted share count of 36.6M in 2027E drives the entirety of our EPS upside vs. consensus."

For an analyst ratings summary and ratings history on Bread Financial Holdings click here. For more ratings news on Bread Financial Holdings click here.

Shares of Bread Financial Holdings closed at $83.15 yesterday.