Fly Intel: What to watch in credit card space earnings reports
American Express (AXP) is scheduled to announced quarterly results on January 26, while Visa (V) and MasterCard (MA) are expected to report on January 28. What to watch for: 1.'INCREASINGLY' CONSTRUCTIVE: Last week, JPMorgan analyst Richard Shane upgraded American Express to Overweight from Underweight with a price target of $148, up from $105. The analyst told investors that he is "increasingly constructive" on consumer finance entering 2021. He looks for 10%-15% multiple expansion for the group as a whole through the end of the year. 2022 multiples should expand, as stocks revert to an historical relationship in context of normalized earnings, Shane added. 2. 'HIGH-QUALITY' RECOVERY PLAYS: Earlier this month, Jefferies analyst Trevor Williams upgraded Visa and MasterCard to Buy from Hold with price targets of $250 and $415, respectively, up from $195 and $315. Both stocks lagged the S&P 500 over the last three, six, and twelve months, which was a "rare stretch of underperformance" for the pair that sets up the stocks well for 2021, Williams argued. With the rollout of the vaccine underway, he has increasing confidence in an eventual recovery in international travel and sees significant upside to consensus cross-border revenue estimates in fiscal years 2022 and 2023. Williams called both stocks "high-quality recovery plays." 3. AMEX SALES TACTICS INVESTIGATION: The inspectors general offices of the Treasury Department, Federal Deposit Insurance and Federal Reserve are investigating whether American Express used aggressive and misleading sales tactics to sell cards to business owners and whether customers were harmed, AnnaMaria Andriotis of Wall Street Journal reported, citing people familiar with the matter. The federal investigators are also examining whether specific employees contributed to the alleged behavior and if higher-level employees supported it, sources told the Journal. The Office of the Comptroller of the Currency is also investigating business-card sales practices at AmEx, the sources added. Commenting on the news, American Express told media outlets that, "We have been cooperating with a regulatory review of small business card sales between 2015 and 2016. We have conducted a detailed, independent review of these sales from this time period, and found no evidence of a pattern of misleading sales practices. We take these matters seriously, and will continue to cooperate with our regulators." 4. DIVIDEND, SHARE BUYBACK: MasterCard has raised its quarterly dividend to 44c from 40c per share. The cash dividend will be paid on February 9, 2021 to holders of record of its Class A common stock and Class B common stock as of January 8, 2021. MasterCard board also approved a new share repurchase program, authorizing the company to repurchase up to $6B of its Class A common stock. The new share repurchase program will become effective at the completion of the company's previously announced $8B program. The company has approximately $3.8B remaining under the current program authorization. 5. PARTNERSHIPS: American Express and Uber (UBER) have announced an exclusive new offer for U.S. Consumer Platinum, Gold and Green Card Members and an Uber Cash benefit for Gold Card Members. Under the agreement, U.S. Consumer Platinum, Gold and Green Card Members have access to a complimentary Eats Pass Membership for up to 12 months, the companies said. Meanwhile, MoneyGram International (MGI) has announced the expansion of its Visa debit card deposit service across Europe. The expansion has launched in collaboration with Checkout.com, utilizing Visa Direct, Visa's real-time push payments platform. MoneyGram customers can now use the company's website or mobile app to send money in near real-time to Visa debit card holders across 575 corridors from 25 countries in Europe.