Capital One Stock Weak After Earnings, Brex Deal in Focus

Key Points

• Capital One stock fell 6% after earnings despite revenue beating expectations.
• The Brex deal expands Capital One’s payments strategy but adds near-term risk.
• Technical indicators suggest COF may be forming a buy-the-dip setup.

Capital One Financial NYSE: COF stock is down approximately 6% one week after the bank’s earnings report on Jan. 22. For the fourth quarter of 2025, the company delivered $15.62 billion in revenue, beating expectations for $15.49 billion. However, the bottom line was a miss with earnings per share of $3.86, missing estimates of $4.14.

From the perspective of investors concerned about valuation, the selloff in COF stock seems justified. Even after the drop, Capital One still trades at a price-to-earnings (P/E) ratio of over 74x. That’s a significant premium to its historical average and well above average for financial stocks.

That said, both the top-line and bottom-line numbers for the fourth quarter were higher year-over-year (YOY). Earnings per share were up 24% and revenue was up a whopping 53% from the prior year.

This growth signals that Capital One is in an expansive phase, which could continue in 2026. Some investors believe that was fully priced into COF stock heading into earnings. However, another catalyst may be at play.

Capital One to Acquire Brex

As part of its earnings report, Capital One announced it would be purchasing Brex Inc., a privately held financial services and payments startup, for $5.15 billion. The deal, which will be paid 50% as stock and 50% as cash, is expected to close in the second quarter of 2026.

Brex specializes in providing financial services used by enterprises to administer corporate credit cards, expenses, and rewards.

The company’s primary target is startups and other businesses that face challenges getting attention from traditional corporate providers like American Express NYSE: AXP.

However, with a customer base that includes Robinhood Markets NASDAQ: HOOD and Intel Corp. NASDAQ: INTC, it’s easy to see why Brex has over $13 billion in deposits.

According to chief executive officer (CEO), Richard Fairbank, the deal is part of the company’s long-term plan “to build a payments company that sits at the frontier of the technology revolution.”

Acquiring, rather than partnering with Brex, is what makes this different from the strategy other banks are using to compete with nimble fintechs.

The Deal Is Not Without Risk

Investors may be concerned about the company’s appetite for acquisition. The Brex deal is coming less than a year after Capital One acquired Discover Financial for $35 billion.

Notably, though, the deal could give Capital One the scale to compete with Visa NYSE: V and Mastercard NYSE: MA. It also appears that it won't change the company’s debt outlook meaningfully.

At the same time, if execution became more important with the Discover acquisition, it becomes even more critical now. Brex reached its peak valuation in 2023 because of deposits from many technology companies that fled Silicon Valley Bank. But the company has faced lower demand with rising interest rates. That’s allowing Capital One to buy the company at less than half its peak valuation.

COF Stock Looks Like an Attractive Buy-the-Dip Candidate

The post-earnings price action in COF stock looks like a case of investors selling first and asking the critical questions later. The stock is now trading within about 10% of its 60-day low, which has approximated a level of support for the last six months.

Analysts give COF stock a consensus price target of $274.70, which represents about 24% upside from the stock’s price as of this writing. More importantly, the stock is showing signs of bouncing off oversold levels as defined by momentum indicators like the MACD and the relative strength indicator.

Investors may consider getting involved at any price below the company’s current 20-day simple moving average (SMA), which has been a key resistance level in the last six months.