Lake Street analyst Mark Argento views the 12% selloff yesterday in shares of Trupanion (TRUP) on Synchrony Financial's (SYF) acquisition of Pets Best insurance as an overreaction. Pets Best insurance is a pet health insurance product company underwritten by Trupanion's insurance subsidiary, American Pet Insurance Company, Argento tells investors in a research note. The analyst understands the "knee jerk reaction" to the stock trading off as there is a risk that Synchrony could move underwriting of Pets Best's 125,000 pet policies away from Trupanion. Further, Pets Best with Synchrony is now a more formidable competitor to Trupanion, he adds. However, it is important to note Synchrony is not an insurance company and will likely need to maintain or grow its underwriting relationship with Trupanion, Argento writes. He believes Synchrony's motivation for the acquisition is to cross-sell its CareCredit consumer credit products to Pets Best's 125,000 policyholders and vice versa. This is a consumer credit play for Synchrony and not a foray into the insurance business "from what we can tell at this juncture," says the analyst. Argento keeps a Buy rating on Trupanion with a $46 price target.

BMO Capital analyst James Fotheringham raised the firm's price target on Synchrony to $41 from $40 and keeps a Market Perform rating on the shares after its Q1 earings beat. The company's lower-than-previously modeled RSA payments more than offset higher expected credit and operating costs, the analyst tells investors in a research note.

Says receivables growth consistent with expectations, payment rate slightly lower than expectations and purchase volume below expectations. Says net interest income growth higher than expectations due to lower than expected payment rate and lower than expected deposit betas. Says credit, RSA and other expense largely in-line with expectations. Says expects typical seasonality in purchase volume, loan receivables, net interest income and in credit performance. Says expects net charge-offs to peak mid-year. Says expects reserve coverage at year-end to be lower than '23 year-end rate. Says expects RSA to align to program performance and function as designed. Comments taken from Q1 earnings conference call.

Reports Q1 revenue $4.8B, consensus $4.45B. Reports Q1 CET1 capital ratio 12.6%. Reports Q1 net charge-offs 6.31%. "Synchrony's first quarter performance highlights the resiliency of our business model and focus on delivering sustainable, strong results for each of our stakeholders," said Brian Doubles, Synchrony's President and Chief Executive Officer.