Is Capital One Stock a Buy?
It's been a rough few weeks for Capital One Financial (NYSE: COF). It's a credit card company as well as a bank, and both types of business have been under fire. Banks are struggling with liquidity, while creditors are dealing with rising delinquencies. It's no wonder Capital One's stock price is down more than 13% just since its July peak, and more than 40% below its 2021 high.
This weakness, however, is ultimately a buying opportunity for investors who understand Capital One's business and can see the bigger picture. The worst-case scenario is already priced in, and then some.
Don't misunderstand. There are risks. Chief among them is the risk of the unknown. Capital One even acknowledges as much, choosing to not give credit-performance guidance with its most recent quarterly report. In the meantime, its 30-day delinquencies on credit card loans grew from 2.42% of the loan portfolio a year ago to 3.77% as of the end of last quarter, while charge-offs jumped from $845 million in the second quarter of 2022 to nearly $2.2 billion for the quarter ending in June. Capital One is also being required by the Federal Reserve to raise its so-called "stress Capital" levels from 3.1% of assets to 4.8% following recently administered stress tests of the nation's biggest banks. The increase suggests the bank and credit card lender would have a tougher time handling economic turbulence than it would have a year ago.
Source Fool.com
