Yesterday, American Express Company (AXP) (AmEx) announced the creation of a $100 million investment fund in order to expand the company’s presence in the digital commerce market.
Accordingly, the company will acquire minority stakes in various start-ups and form partnerships with various companies, particularly those involved in mobile and online payment management, data analysis, loyalty and rewards, security and fraud detection, personalized offers, location-based and fees-based services.
The investments and deals will be made over the next few years and will be managed from AmEx’s new office in Silicon Valley. Around 30-50 people will be hired over the next couple of years for identifying and developing deals.
AmEx is already involved in various digital commerce initiatives. In September 2011, the company announced its first ever collaboration with China’s largest internet service provider – Tencent Holdings Ltd. to help provide cross-border purchases to Tencent’s online payment unit – Tenpay.
In August 2011, the company announced a partnership with Verizon Wireless to integrate AmEx’s Serve on Verizon mobile phones and tablets. Serve is the next-generation commerce and digital payment platform, using which Verizon Wireless customers will be able to make payments for purchase of goods and services directly from their mobile phones and tablets. Earlier in April 2011, AmEx invested in Payfone, which is a mobile payment processing company.
The move to invest in the digital commerce business is a prudent step, considering the rapidly changing payment scenario in which online and mobile payments are gaining significance. While it will help AmEx in staying up to date with emerging technology and establishing a foothold in the digital commerce space, it will also provide the other companies access to AmEx’s sizeable customer base, merchant network, global presence, consumer data and payment network.
Earnings Review
AmEx reported third quarter 2011 operating earnings of $1.03 per share, comfortably ahead of the Zacks Consensus Estimate of 96 cents and 90 cents recorded in the year-ago quarter.
The Zacks Consensus Estimate for fourth quarter earnings is currently pegged at 98 cents per share, up about 4.2% year over year. Of the 17 firms covering the stock, 9 revised their estimates upward, while 5 downward revisions were witnessed in the last 30 days.
For 2011, earnings are expected to be about $4.05 per share, climbing about 19% from 2010.
AmEx competes with Discover Financial Services (DFS), Visa Inc. (V) and MasterCard Incorporated (MA). The company carries a Zacks #3 Rank, which translates into a short-term Hold rating.
On Tuesday, the shares of AmEx closed at $51.34, up 0.18%, on the New York Stock Exchange.
AMER EXPRESS CO (AXP): Free Stock Analysis Report
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VISA INC-A (V): Free Stock Analysis Report
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