“I Just Think There Are Cleaner Ways to Play Every Part of This Story”

Bread Financial Holdings, Inc. (NYSE:BFH) is among the stocks Jim Cramer reviewed while discussing the Iran ceasefire that triggered a relief rally. Cramer said that the company has a “real niche,” as he stated:

There’s a real business here. This company is the financing engine behind a lot of branded credit card programs that consumers tend to use without ever thinking about who’s underwriting them. But here’s the part that jumped out at me once I started digging. This is not a smooth earnings story, even in comparison to some of its peers. It’s a lumpy, cyclical, credit-sensitive story… Now, to Bread’s credit, it’s not a broken company, far from. It has a real niche, solid brand relationships, growing deposit base, management that spent the past couple of years trying to make the business more resilient.

The problem is this: This is exactly the kind of stock that can look fine right up until the consumer weakens. Then suddenly losses soar, and the earnings power everybody thought they saw vanishes. Right now, Bread sells for less than eight times this year’s earnings estimate. Looks cheap, right, on the surface. Stock screams undervalued, but cheap cyclical lenders almost always look cheapest right before you remember why they were cheap in the first place. Yeah, that’s the trap.

And Wall Street’s looking for earnings to come down from 2025 levels in each of the next two years, each. Here’s the bottom line: Bread Financial is interesting but not compelling enough for me to recommend to you over the alternatives… Don’t get me wrong, Bread can work in the right environment. I just think there are cleaner ways to play every part of this story.

A stock market chart. Photo by Arturo A on Pexels

Bread Financial Holdings, Inc. (NYSE:BFH) provides technology-driven lending and payment solutions, including credit card programs, installment loans, and point-of-sale financing. Moreover, the company offers data analytics services and retail deposit products, such as high-yield savings accounts and certificates of deposit.

While we acknowledge the potential of BFH as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 Years 

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