Investing.com – Morgan Stanley upgraded its view on the consumer finance stock to “attractive” given positive fundamentals and a friendlier regulatory environment.

Key factors include moderating inflation, lower unemployment and stable lending standards. The number of arrears, which decreased significantly in 2024, is expected to decrease further in 2025. EPS growth for this sector is forecast to be 15%, which is the fastest pace in four years.

The brokerage stressed less regulatory pressure under the GOP-controlled administration. Morgan Stanley (NYSE:) predicts that the CFPB’s proposed delayed fee rules may not be adopted, boosting profits for companies such as Synchrony Financial (NYSE:) and Bread Financial.

Morgan Stanley upgraded Synchrony to “underweight” from “overweight,” raising its price target on the stock to $82 from $40.

While Bread Financial changed from “underweight” to “overweight”, taking the target to $76 from $35, adding that delayed fees account for approximately 20-25% of BFH’s revenue.

Introducing a $8 cap on delayed fees would mean a significant decline in future profits without offsetting. However, the lower probability of the rule holding at this point offsets the difference between bull and bear in 2025 and beyond.

MS analysts said they now expect the delayed fee provisions to be withdrawn or not make it through the courts. The provision has been stuck in the courts for nine months and faces a high hurdle to make it through conservative-dominated courts, including the Fifth Circuit and the Supreme Court.

However, loan growth remains a problem. Consumer lending is slowing down, and card lending growth is expected to stabilize at 3-4% by mid-2025.

The note highlighted potential risks, including higher valuations and uncertainty around credit quality improvements. However, analysts remain sanguine about deregulation beneficiaries and companies with EPS catalysts next year.