American Express Co.
), or AmEx'slatest attempt to aggressively penetrate into the
mobile-payments market led its shares to scale new 52-week high of
$95.88 on Jun 9. This global payment processor's shares has risen
about 7.4% alone since the beginning of 2013 and 9.3% since release
of its first-quarter 2014 results in mid-April.
The momentum of this Zacks Rank #3 (Hold) stock was driven by
strong credit indicators, higher capital returns and strategic
alliances including the one with global firm for superior brands of
car-rental service − Uber Technologies
Monday's closing price represents a strong one-year return of
about 22.5%, which outperformed the S&P 500 index of 18.7% as
well. Average volume of shares traded over the last three months
stands at approximately 3,482.7K.
On Jan 16, AmEx reported fourth-quarter 2013 operating earnings
per share of $1.33, higher than both the Zacks Consensus Estimate
and the year-ago quarter figure by 2.3% and 15.7%, respectively.
Overall, the companydelivered positive earnings surprise in 3 of
the last 4 quarters with an average beat of 2.2%.
The upbeat earnings resulted from higher spending on cards as
well as improvements innet interest income and loan portfolio.
Further, higher yields, lower operating expenses and strong credit
indicators were partially offset by higher provision for losses
Mobile Payments a New Growth Catalyst
AmEx has been focusing on strengthening performance in its U.S.
card services and Global Network & Merchant Services segments,
both of which witnessed healthy growth during first-quarter 2014.
The addition of Uber to its network further acts as a growth
catalyst for AmEx's mobile-payments business.
Valued at about $17 billion, Uber is a venture capital-backed
start-up that has gained strong valuations in a short span of 4
years. Per the alliance, AmEx aims to tap all the customers of Uber
to use its cards on the latter's mobile application. For this, AmEx
will be reward the members with extra points for booking cars
through this application.
We look forward to many more of such tactical merchant alliances
by AmEx within the mobile-payments space, which is expected to be
booming. Early this year, Forrester Research Inc. estimated that
the market for mobile payments in the U.S. is expected to grow to
almost $90 billion by 2017 from about $12.8 billion in 2012.
Given the convenience, affordability and security, both
merchants and consumers are steadily adopting mobile payments,
raising growth prospects for AmEx as well. The recent alliance with
Wal-Mart Stores Inc.
), the merchant acquiring program - OptBlue and the dividend hike
further instill confidence among the investors.
Meanwhile, some better-ranked financial stocks like
Global Cash Access Holdings Inc.
Euronet Worldwide Inc.
) are worth considering. Both the stocks carry a Zacks Rank #2
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