Capital One Financial Corp. (COF) surprised Wall Street on Wednesday when it revealed how much money it spent on advertising in the fourth quarter: a lofty $511 million. The figure weighed on earnings, and the stock dropped 4.1% before Thursday's opening bell.

But analysts at Hilliard Lyons say investors' negative reaction creates a buying opportunity. They say that although marketing costs may appear to be over-the-top, it's all part of Capital One's strategy to gain customers through promoting brand identity.

Hilliard Lyons notes that although Capital One's fourth-quarter earnings fell 22 cents short of analyst's expectations, they were in line with the company's own estimates.

Analysts at Lehman Brothers also express confidence in Capital One. They admit they were taken aback by the amount of marketing expenses, but, they say, it "was likely money well spent."

"We believe that the company isn't so foolish as to simply flush money down the drain by wasting it on marketing spending that it never expected to earn a meaningful return on," Lehman Brothers analysts say.

Lehman Brothers points to "the fastest quarterly account growth in the last ten quarters" as evidence that Capital One's branding strategy is working short-term. And they say it should continue to pay off down the road, "helping the company beat expectations" in 2005.

Lehman Brothers reiterated its "outperform" rating of the stock on Thursday. Hilliard Lyons raised its rating to "buy" (from "long-term buy") on Friday.

Capital One is one of the top six credit card issuers in the U.S., with nearly 50 million accounts globally, according to Hoovers.

At $78, shares sell for about 11 times the consensus 2005 earnings per share estimate of $6.96.

--Lisa Dixon

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