COF Options: Capital One's Bullish Setup with Short-Term Weakness

Capital One Financial Corporation is a diversified financial services holding company offering a broad array of financial products and services to consumers, small businesses, and commercial clients. Its core offerings include 'Visa' and 'MasterCard' credit cards, debit cards, bank lending, treasury management, depository services, and auto loans. The company operates through three major business segments: 'Credit Card' (domestic consumer and small business card lending, and international card businesses), 'Consumer Banking' (deposit gathering and lending activities for consumers and small businesses, and national auto lending), and 'Commercial Banking' (services to commercial real estate and commercial and industrial customers). Capital One differentiates itself by focusing on a comprehensive people strategy that includes investments in recruiting and associate development to attract and retain top talent.

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COF's technical outlook leans slightly bearish. The stock has experienced a decline over the past 90 days, moving from approximately $212.76 on June 30th to $220.46 on November 4th, but not without significant volatility, including a sharp drop in October. The price is currently above its 50-day SMA (219.74), which acted as resistance in the recent past, and also above the 21-day EMA (218.10), suggesting short-term upward momentum. However, the MACD histogram has been negative for much of the recent period, and while it turned positive briefly, it is now hovering near zero (MACD at 1.03, MACDs at 0.19). This indicates waning bullish momentum. The RSI is at 55.08, which is neutral. The stock price is also within the Bollinger Bands, suggesting normal volatility. The recent price action suggests a potential consolidation phase after a prior downtrend, but the weakening MACD and neutral RSI indicate a lack of strong conviction in either direction. Given these mixed signals, the stock could continue to consolidate or experience a further decline in the coming 1-3 months.

Capital One's MD&A reveals a complex picture following its acquisition of Discover. For the third quarter of 2025, `Net interest income` increased by 54% to $12.4 billion, and `Total net revenue` rose 53% to $15.359 billion, largely due to higher loan balances post-acquisition. `Non-interest income` also increased by 52% to $2.955 billion. However, `Net income` only increased by 80% due to higher `Non-interest expense`, which rose 55% to $8.263 billion, and `Provision for credit losses`, up 9% to $2.714 billion. The nine-month figures show a similar trend, with `Total net revenue` up 31% to $37.851 billion, but `Net income` down 91% to $319 million, driven by an 82% increase in `Provision for credit losses` to $16.513 billion. The company incurred $348 million in integration expenses in the third quarter and $757 million in the first nine months related to the Discover acquisition. The company's outlook is cautiously optimistic. They have authorized the repurchase of up to $16 billion of shares of common stock beginning in October 2025, indicating confidence in their capital position. The company is in the process of integrating Discover into its existing risk management practices, policies and processes.

The Capital One Q2 2025 earnings call paints a moderately bullish picture, largely driven by the recent acquisition of Discover. While the integration is still in its early stages, management expresses excitement about the combined company's potential. CEO Richard Fairbank stated, 'We're as excited as ever by the expanding set of opportunities to grow and create value as a combined company'. CFO Andrew Young highlighted that the partial quarter impact of Discover contributed $2 billion of revenue, though also a $6.4 billion net loss due to purchase accounting. The company reaffirmed its synergy target of $2.5 billion. However, integration costs are expected to be 'somewhat higher' than the previously announced $2.8 billion. Despite these increased costs, Fairbank emphasized that the 'earnings power of our combined company...is consistent with what we assumed' at the time of the deal announcement. The company's CET1 ratio stands at 14%, and while they are still assessing the long-term capital needs, they feel comfortable that they are operating with excess capital.

COF's financial performance presents a mixed picture over the past several quarters. Revenue has shown a general upward trend, increasing from $13.09B in Q1 2024 to $16.41B in Q2 2025, before dropping sharply to $53M in Q3 2025, an anomaly likely due to incomplete data. Gross profit ratio has fluctuated significantly, starting at 0.51 in Q1 2024, peaking at 0.56 in Q1 2025, then plummeting to 0.069 in Q2 2025, and finally registering at 0 in Q3 2025. Operating cash flow has been generally positive, with $6.06B generated in Q2 2025, and $4.66B in Q1 2025, indicating a healthy ability to generate cash from core operations, although Q3 2025 is missing. Total debt has remained relatively stable, ranging from $41.77B in Q1 2025 to $52.66B in Q2 2025 and then dropping to 0 in Q3 2025. While the company has demonstrated an ability to generate operating cash flow and manage its debt, the inconsistency in revenue and profitability metrics, particularly the sharp drop in the most recent quarter, requires careful monitoring and further investigation to determine the underlying causes and potential impact on future performance. The absence of key data in Q3 2025 makes a complete assessment challenging.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting efficient cost management. Return on Equity (ROE) has shown positive movement, signaling enhanced profitability and efficient use of shareholder equity. The Price-to-Earnings (P/E) ratio, while elevated, might be justifiable given the growth trajectory and positive ROE trend. The Debt-to-Equity ratio shows a slight increase, which warrants monitoring, but is counterbalanced by a healthy Current Ratio, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable picture with growth and profitability, though the leverage should be watched closely. The combination of growth and profitability suggests potential for continued positive performance over the next 12 months.