Digital Integration And Major Retail Partnerships Will Underpin Enduring Value

Key Takeaways

• Strategic partnerships and digital payment product launches with leading retailers are driving recurring revenue, customer retention, and stable earnings.
  
• Investment in advanced analytics, AI, and embedded finance expands operational efficiency, risk mitigation, and promotes sustainable growth across diversified markets.
  
• Shifting consumer behavior, partner concentration, fintech competition, regulatory pressures, and technology investment needs threaten long-term growth, profitability, and market position.

Catalysts

Operates as a consumer financial services company in the United States.

• Synchrony is set to benefit from the accelerating penetration of digital payments and e-commerce, as shown by new product launches with Amazon (Pay Later) and the Walmart OnePay digital partnership, both of which enable deeper access to online and omnichannel consumer spending and should drive stronger loan receivables and fee income growth over time.
  
• The company's proactive investment in advanced data analytics, AI, and end-to-end digital platforms-including deeper digital integration of new cards with PayPal and Walmart-enhances risk management and operational efficiency, thereby supporting improved net interest margins and lower charge-offs as these technologies mature.
  
• Renewed and expanded long-term strategic partnerships with major retailers and e-commerce platforms such as Amazon and Walmart provide long-term visibility on program revenues and drive customer retention, providing a more stable and recurring revenue base as well as lower earnings volatility.
  
• The company's expansion in high-growth verticals like health, wellness, and pet financing-where it is resuming growth after recent credit tightening-broadens the consumer base and diversifies revenue streams, contributing to more sustainable earnings growth and risk mitigation over the long run.
  
• Synchrony's growing presence in embedded finance and point-of-sale lending, visible through new Buy Now, Pay Later programs and omnichannel financing solutions, positions the company to capitalize on evolving consumer preferences for flexible, tailored financial products-translating into future revenue and market share gains.

Synchrony Financial Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Synchrony Financial's revenue will grow by 21.7% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 34.9% today to 19.7% in 3 years time.
• Analysts expect earnings to reach $3.3 billion (and earnings per share of $10.46) by about September 2028, up from $3.2 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.3x on those 2028 earnings, up from 8.8x today. This future PE is lower than the current PE for the US Consumer Finance industry at 10.5x.
• Analysts expect the number of shares outstanding to decline by 4.44% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.18%, as per the Simply Wall St company report.

Synchrony Financial Future Earnings Per Share Growth

Risks

• Elevated payment rates and lower purchase volumes-driven by both recent credit tightening and increasingly selective consumer spending-have resulted in flat or declining loan receivables and net revenue, which could signal structural challenges to long-term growth and future revenue generation.
  
• Continued high concentration of major retail partners (e.g., Walmart, Amazon, PayPal), despite renewals, leaves Synchrony at risk of significant revenue and earnings declines if any major partnership is lost, renegotiated on less favorable terms, or underperforms.
  
• Rising competition from fintechs and alternative payment solutions-including Buy Now, Pay Later offerings like Synchrony's own new Amazon product-can erode demand for traditional credit cards, pressure net interest margins, and reduce Synchrony's ability to grow its customer base and market share with younger, tech-savvy consumers.
  
• Increased regulatory scrutiny (e.g., rules on late fees, APR caps, and consumer protection) combined with anticipated higher compliance and technology investments may raise operating costs and compress net interest margins, directly impacting long-term profitability.
  
• Heavy ongoing investment required in technology (AI, embedded finance, digital integration) to keep pace with evolving consumer preferences and maintain competitiveness may pressure efficiency ratios and limit future earnings growth, especially if revenue does not scale proportionally.

Valuation

• The analysts have a consensus price target of $79.619 for Synchrony Financial based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $100.0, and the most bearish reporting a price target of just $60.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $16.5 billion, earnings will come to $3.3 billion, and it would be trading on a PE ratio of 10.3x, assuming you use a discount rate of 9.2%.
• Given the current share price of $76.07, the analyst price target of $79.62 is 4.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.