I like to look at what Wall St analysts say about such companies. What is the risk that I am not seeing? Apparently fear of new regulations on late fees is a big concern.

Bread Financial Holdings (NYSE:BFH) stock sank 3.9% in Monday midday trading after Goldman Sachs downgraded the consumer finance stock to Sell against a backdrop of rising credit losses and uncertainty over late fees.

The late fee uncertainty will overhang the stock until at least the middle of next year, said Goldman analyst Ryan Nash.

"When we put it together, we think BFH could have up to ~$9-10 in normalized earnings over the longer term (excluding any changes to late fees), but in the near-term, we see credit pressuring earnings down to $6.50 in 2024 (consensus of $9.84), and if late fee regulation is implemented at some point in 2024, earnings could be well below," he wrote in a note to clients.

seekingalpha.com - Bread financial cut to sell at goldman on concerns over credit losses late fees

Bread Financial Holdings (NYSE:BFH) stock slid 2.9% in Thursday morning trading after Bank of America analyst Mihir Bhatia downgraded the credit card issuer to Neutral from Buy as rising credit losses and pending late fee regulation pose "outsized risks."

The company "has the highest exposure to sub-prime consumers, which makes earnings particularly susceptible to credit and late fees," Bhatia pointed out in a note.

Looking at the wider consumer finance space, credit loss rates now are in line with pre-pandemic levels and are expected to keep rising over the next few quarters, the note said, in what could weigh on overall sentiment.

seekingalpha.com - Bread financial cut to neutral at bofa on credit regulation risks