Credit Card Weekly Notes: American Express, MasterCard, Discover

-20.73%
Downside
221
Market
175
Trefis
AXP: American Express Company logo
AXP
American Express Company

During the week ended December 12, American Express (NYSE:AXP) announced multiple partnerships with brands in the travel space as well as a new technology center. Meanwhile,  MasterCard (NYSE:MA) launched its MasterPass service in more countries in Europe, while Discover Financial (NYSE:DFS) discussed its plans to make payments more secure in 2015.

In this weekly note we review the recent developments and also track the stock performances for the aforementioned credit card companies.

American Express: New Technology Hub, More Partnerships

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Earlier this week, AmEx announced a slew of new partnerships. First, AmEx linked up with Airbnb to announce a new membership rewards program. [1] According to the company press release, the program will allow AmEx’s U.S. cardholders enrolled in its Membership Rewards Program to use rewards points for Airbnb e-gift cards. Travel is the most popular way that AmEx users redeem rewards points, so the partnership makes sense.

AmEx also announced the extension of its exclusive co-branded credit card with Delta Airlines (NYSE:DAL). Delta will continue to accept AmEx cards while remaining a participant in the card company’s Membership Rewards Program. [2] The AmEx-Delta Sky Miles co-branded credit card portfolio accounted for nearly 5% of the company’s total worldwide billed business in 2013. [3]

AmEx also announced that it is setting up a new technology hub in Palo Alto. The new center will house a team with a focus on innovations in big data, cloud computing and mobile infrastructure. [4]

AmEx’s closing price of $93 on Thursday put the company’s market cap at just over $96 billion, compared to our valuation of $106 billion. We have a price estimate of $103 for the company’s stock. We estimate EPS of $5.66 for the current calendar year, slightly higher than the consensus EPS of $5.56 for the company.

See our complete analysis of AmEx’s stock here

MasterCard: MasterPass Expansion In Europe

Earlier in the week, MasterCard launched its digital payment platform MasterPass in France and Russia. This takes the number of countries served by the service in Europe to seven, and sixteen globally. The service is also available in North America, the UAE, Australia, New Zealand, Brazil, China, Taiwan, South Africa and Singapore. [5] MasterPass was launched in February 2013 at the Mobile World Conference to enable a better digital payment experience for consumers. [6] MasterPass is a digital platform that allows consumers to use any payment card or enabled device to conduct online or in-store transactions.

We have a price estimate of $83 for MasterCard’s stock, slightly below the market price, valuing the company at about $96 billion.

See our full analysis of MasterCard here

Discover: Shifting To Safer Cards

Discover revealed during a presentation at the Goldman Sachs U.S. Financial Services Conference that it will be spending in excess of $35 million in 2015 for migration to much safer EMV chip-enabled credit and debit cards. [7]

Discover’s stock dropped by more than 3% through Friday afternoon. We have a price estimate of $65 for the company’s stock, translating into a valuation of nearly $30 billion, which is slightly ahead of the current market price.

See our complete analysis of Discover Financial here

Notes:
  1. American Express and Airbnb announce Membership Rewards® Program Relationship, American Express Press Release []
  2. American Express and Delta Extend Partnership, American Express Press Release []
  3. SEC 10-K Filing []
  4. American Express Creates New Technology Hub in Silicon Valley, American Express Press Release []
  5. MasterPass Availability Infographic []
  6. MasterPass at a Glance []
  7. DFS Goldman Sachs Conference, Investor Relations []