Here’s Why SBI Cards is Declining Over 2.5% on Monday

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Here’s Why SBI Cards is Declining Over 2.5% on Monday

By Malvika Gurung

Investing.com -- Shares of the credit card company and payment solutions provider SBI (NS: SBI ) Cards and Payment Services Ltd (NS: SBIC ) declined 2.62% to Rs 902.7 apiece at 1:23 pm on Monday, after tanking 3% to Rs 900 apiece in early deals.

The stock slumped after foreign brokerage Goldman Sachs (NYSE: GS ) initiated a ‘Sell’ call on the company, lowering the target price to Rs 654 apiece, which is a 27.6% downside compared to the current values.

Despite having retained the market share and remaining profitable during the pandemic, the renowned brokerage initiated a Sell call on the company, as it believes that the headwinds are set to only intensify going forward, cited a CNBC TV-18 reporter.

The headwind parameter, added with the rich valuations the company currently rides on, makes the risk-reward highly unfavourable for SBI Cards, states the brokerage.

It estimates an earnings degrowth of 18% from FY22 to FY25, compared to a 25% growth in the past 5 years.

The reporter further cites that going forward, three specific headwinds will affect SBI Cards’ growth.

  • The rising popularity of alternatives like ‘Buy Now Pay Later'.
  • Regulatory changes could potentially impact the fees for the company in due course. For instance, a challenge posed at MDR/interchange rate.
  • Increasing competition from cash-rich fintech companies and banks.

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