Alliance Data Systems Corporation (ADS) Buy or Sell Stock Guide

Last updated: Sep 23, '17

The analysis below may be helpful to you if you have any of the following questions about ADS stock:

  • Is ADS a buy or a sell?
  • Should I sell or hold ADS stock today?
  • Is ADS a good buy / a good investment?
  • What are ADS analyst opinions, recommendations, ratings?

Here are ADS stock buy reasons/signals:

1. Alliance Data Systems is coming off a record period for signing new retail partnerships. Partnerships such as Williams-Sonoma and Ulta Beauty should fuel significant growth in the coming years.

2. The high switching costs that retail partners must endure insulate Alliance Data Systems from competitors.

3. Credit quality should not be an issue, because Alliance Data Systems caters to mostly higher-income consumers.

4. ADS forward dividend yield is 0.94%, higher than the industry (0.62%) and sector (0.27%) forward dividend yields.

5. ADS forward P/E ratio is 10.01, and it’s low compared to its industry peers’ P/E ratios.

6. ADS Price/Sales ratio is 1.60, and it’s low compared to its industry peers’ P/S ratios.

7. ADS PEG ratio (P/E adjusted for growth) is 0.93, and it’s low compared to its industry peers’ PEG ratios.

8. ADS average analyst rating is Buy.

9. ADS average analyst price target ($270.91) is above its current price ($216.76).

Here are ADS stock sell reasons/signals:

1. The impressive returns of private-label credit cards have attracted the attention of other card issuers, who would like to establish a presence in the space.

2. The company's growth in credit card receivables raises questions about whether the strong credit performance can continue.

3. Epsilon's agency marketing segment has come under pressure from traditional advertising agencies, which are enabling clients to circumvent Epsilon's offering.

4. ADS quarterly revenue growth was 4.20%, lower than the industry and sector average revenue growth (4.62% and 5.80%, respectively).

5. ADS profitability is declining. The YoY profit margin change was -2.04pp.

6. ADS short share of float is 6.02%. The stock is much more frequently shorted than the average industry, sector or S&P 500 stock.

7. ADS short interest (days to cover the shorts) ratio is 4.29. The stock garners more short interest than the average industry, sector or S&P 500 stock.

What are your thoughts on ADS?

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