BFH Stock Forecast & Price Target

Bread Financial Holdings is expected by the author to benefit from loosening underwriting standards and increased pricing to drive customer growth and increased spending and lending volume. With an aggressive management team that has already demonstrated strong execution in 2025, the company is poised for continued improvement in credit losses, growth in credit sales, inflection towards loan growth, strong NIM, operating leverage performance, and accelerating share repurchases. With an undervalued stock price currently trading at 1.3x 3Q25 TBV and 7x/6x 2026/2027 EPS, the target price of $105, which is only 10x 2026 EPS and 8x 2027 EPS, leaves potential for significant future valuation growth.

Bread Financial Holdings is facing potential new capital rules that could provide a 100 basis point CET1 benefit, on top of their 130 basis point excess capital position and the potential for another ~100 basis point benefit from preferred equity raises. They are poised for growth as they continue to win more merchants, with deeper engagements and higher discount rates, resulting in a forecasted 20% y/y EPS growth in 2027 and 39% y/y growth in 2028, leading to expanding ROTCE from 17% in 2026 to 23% in 2028. However, with a negative outlook, the analyst believes that Bread Financial Holdings may not be able to sustain this growth and may face challenges in their credit card business, especially if their retail partners experience financial difficulties. The company's minority interest in LoyaltyOne also may not provide enough diversification to mitigate these risks.