unfortunately that will not happen today. also if reports continue to come negatively due to stregthening dollar market psychology could change very quickly to the negative and tax season is almost upon us as well which also doesnt bode well for equities in general
yes american express does hold more potential risk, in the last recession axp dropped from 56 all the way down to 12, before it became clear that their losses were not going to be catastrophic. Mastercards loss was more muted in the 50% range.
I see, it would appear the payment processing business has its own intricacies just like any other. It sounds as though Visa and Mastercard may hold less risk in times of systemic financial distress - their job is to originate as many loans as they can but they do not necessarily care about the whether the loans are ever repaid, whereas American Express holds the loans and have to keep a significant amount of assets for loan loss provisions on their balance sheet.
Figured it was a good entry point today so I bought for my IRA. AXP should trade back up to $94 sometime this year so it's a bargain and you get to wait with a nice dividend.
Well mostly what i stated above. Mastercard for example is primarily a payments network it issues cards and gets a fee upon their use, while their partners hold loans/issue rewards. As the losn provider and reward issuer, american express has a much different looking income statement than mastercard. For mastercard, total operating expenses come in at $1 billion a quarter. American express spends $2 billion just on rewards and member services each quarter and as the loan owner they have to provision for losses, etc. I supposed what i meant is that the businesses are so different, it doesnt make sense to compare them on a basis such as profit margins.
Investment banking downgrades, nothing else:
AXP got slapped with a slew of price-target cuts, after the company said it had higher expenses and bad-loan provisions in the fourth quarter and will slash 4,000 jobs from the payroll this year. Included in the bunch was Jefferies, which reduced its price target by $5 to $90, and Macquarie, which lowered its target price by $1 to $88. Both brokerage firms underscored their equivalent of a "hold" rating. On the charts, the stock has had a slow start to the year, down 5.8% to $87.67. Against this backdrop, put players have been active. In fact, American Express Company's Schaeffer's put/call open interest ratio (SOIR) of 1.30 ranks in the 74th percentile of its annual range, meaning short-term speculators are more put-heavy than usual.
american express retains their loans, that's most of it. What goes along with that is a very aggressive member rewards program which alone was about $7 billion last year, with other card member services adding about $800 million. Its really a very different business than mastercard and visa.
I keep hearing about how great a business American Express is, but I don't understand why their profit margins are so low compared to Mastercard and Visa. Anyone following this stock have any ideas here?
Plus with the strong dollar and lower oil prices travel will increase, which means lots of credit card spending.