Discover Financial shares rise 7.2%, Capital One shares up 5.3% at open

Discover Financial shares rise 7.2%, Capital One shares up 5.3% at open

Capital One Financial (COF) and Discover Financial Services (DFS) shares have seen significant gains following the announcement of their regulatory approval for a $35 billion merger. Capital One shares opened up 5.3%, while Discover Financial shares rose by 7.2% on April 21, 2025.

The merger, which will create the eighth-largest U.S. bank, has received final regulatory approval from both the Federal Reserve and the Office of the Comptroller of the Currency (OCC). The approval marks a significant milestone in the integration process, with the transaction expected to close by May 18, 2024 [1].

Analysts have expressed optimism regarding the merger's potential impact on Capital One's stock. The average one-year price target for Capital One stands at $209.69, indicating a potential 28.83% upside from its current market price of $162.77. However, GuruFocus estimates a potential downside of 5.13% for Capital One's stock over the next year [1].

Brokerage firms have also shown confidence in the merger, with Capital One receiving an average recommendation of 2.0, reflecting an "Outperform" status. This rating underscores analysts' belief in the stock's performance [1].

The merger is expected to bring several benefits, including increased competition in payment networks, a wider range of products for customers, and enhanced resources for innovation and security. Capital One has also outlined a five-year Community Benefits Plan (CBP) worth over $265 billion, aimed at advancing economic opportunity and financial well-being across America [2].

Despite the positive outlook, the merger is subject to various risks and uncertainties. These include the potential for cost savings and revenue synergies not being fully realized, disruptions to business operations, integration challenges, and regulatory scrutiny. Capital One and Discover have acknowledged these risks and have outlined potential impacts in their regulatory filings [2].

In conclusion, the regulatory approval of the Capital One-Discover merger has led to a positive market reaction, with both companies' shares rising significantly. The merger's potential benefits, as well as the risks and uncertainties involved, will continue to shape investor sentiment and market expectations in the coming months.

References:
[1] https://www.gurufocus.com/news/2789272/capital-one-cof-and-discover-dfs-secure-regulatory-approval-for-35b-merger?mod=news_archive&r=4bf001661e6fdd88d0cd7a5659ff9748
[2] https://www.marketscreener.com/quote/stock/CAPITAL-ONE-FINANCIAL-COR-12144/news/Capital-One-Financial-Receives-Regulatory-Approvals-for-Discover-Deal-49657431/