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

Last updated: Oct 12, '19

Are you looking for the analysis of Alliance Data Systems Corporation (ADS) stock? Are you wondering what the bulls and the bears say about it?

If so, you came to the right place. In this stock guide, we will share with you 9 reasons to buy and 6 reasons to sell ADS stock. You’ll get a perspective on what the bulls and the bears say about it.

The analysis below may be also 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 / investment?
  • What are ADS analyst opinions, recommendations and ratings?

Let’s start with the bull case. Here are the reasons to buy ADS stock:

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 stock price ($122.55) is close to the 52-week low ($117.57). Perhaps now is a good time to buy? See ADS price chart.

5. ADS forward dividend yield is 2.00%, higher than the industry (0.35%) and sector (0.71%) forward dividend yields. See ADS forward dividend chart.

6. ADS forward P/E ratio is 5.34, and it’s low compared to its industry peers’ P/E ratios. See ADS forward P/E ratio chart.

7. ADS Price/Sales ratio is 0.82, and it’s low compared to its industry peers’ P/S ratios. See ADS forward Price/Sales ratio chart.

8. ADS average analyst rating is Buy. See ADS analyst rating chart.

9. ADS average analyst price target ($169.61) is above its current price ($122.55). See ADS price target chart.

Now that you understand the bull case, let’s look at the reasons to sell ADS stock (i.e., the bear case):

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 -3.50%, lower than the industry and sector average revenue growth (4.18% and 3.46%, respectively). See ADS revenue growth chart.

5. ADS short share of float is 7.92%. The stock is much more frequently shorted than the average industry, sector or S&P 500 stock. See ADS short share of float chart.

6. ADS short interest (days to cover the shorts) ratio is 3.5. The stock garners more short interest than the average industry, sector or S&P 500 stock. See ADS short interest ratio chart.

Now let's look at the key statistics for ADS:

Metrics ADS
Price $123.52
Average Price Target / Upside $169.61 / 37.31%
Average Analyst Rating Buy
Industry Credit Services
Sector Financial Services
Number of Employees 20,000
Market Cap $6.26B
Forward P/E Ratio 5.32
Price/Book Ratio 0.81
PEG 2.4
Revenue (TTM) $7.70B
YoY Quarterly Revenue Growth -3.5%
Profit Margin 11.3%

What are your thoughts on ADS?

If you liked this analysis, check out Buy or Sell Stock Guides for other stocks.

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