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The Zacks Analyst Blog Highlights: Discover Financial, American Express and Visa

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·6 min read
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For Immediate Release

Chicago, IL – July 6, 2021 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Discover Financial Services DFS, American Express Company AXP and Visa Inc. V.

Here are highlights from Friday’s Analyst Blog:

"Revenge Traveling" Raged On: 3 Card Issuers in Focus

The COVID-19 pandemic forced people to stay at home for a considerable period of time. Many had to cancel their travel plans due to lockdowns in 2020. But as the economy is bouncing back and people are getting their vaccine shots, travel plans are on. People are indulging in revenge traveling now that things are gradually resuming normalcy. They have enough cash savings to continue with their pending vacation trips.

According to an annual travel survey conducted by Discover Financial in April, the majority of Americans expressed their wish to travel again with more than 50% opting for two vacations over the course of the next six months.

With the fall in daily active COVID cases, consumers are gaining back confidence when it comes to flying to their favorite destinations. The hotel and tours and travel majors are also witnessing a steady rebound.

Customers are expected to use cards for making payments for package tours, thus holding growth prospects for the card issuer companies. Per the poll mentioned above, 56% of customers said that they will stick to the contactless payment mode, which is a boon for card issuers.

Moreover, travellers can gain from stacked-up credit card points and reward, which in turn, will curb their traveling expenses. About one-third of the consumers said that they will redeem the pending rewards for their upcoming vacations, going by the research.

Card issuers like Discover Financial are providing benefits to consumers. For instance, its Discover it Miles card allows cardholders to redeem the rewards as a credit statement for travel costs.

American Express's chief recently said that younger consumers (millennials and Gen Zs) are at around 125% of their spending when compared to pre-COVID 2019 levels. As the younger lot is spending generously on travel, it is leading to a recovery in AmEx card usage. 

American Express, which is known for its special perks for traveling, had to reshape its business due to the pandemic. However, it is now benefiting as people are back to holidaying and dining out.

All these factors bode well for the players in the payments industry.

Our Choices

As the aforesaid sector is poised to gain from this encouraging traveling spend, picking stocks from the same will be a smart move. We thus, selected four stocks that flaunt a Zacks Rank #2 (Buy) or 3 (Hold). These stocks have also outperformed the industry in the past year and witnessed upward estimate revisions in the past 30 days too. You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.

Visa operates retail electronic payments network worldwide. The company offers business travel-related services through its non-consolidated joint venture American Express Global Business Travel. Although the company suffered a setback from a decline in the usage of travel-related benefits due to COVID-led restrictions on travel, things are looking positive right now.

Its network volumes are highly dependent on travel and entertainment expenditure (T&E). The Zacks Consensus Estimate for current-year earnings has risen 0.4% over the past 30 days. In the past year, the stock has gained 20.1% compared with the industry's growth of 13.4%.

The company's expected earnings growth rate for the current year is 10.91%. It has a Zacks Rank #3 (Hold) at present.

New York-based American Express is a diversified financial services entity. Although the company took a hit from decreased traveling and entertainment spend last year, it is now expected to gain from revenge traveling. To this end, AmEx is enhancing the benefits on its high-value Platinum Card, the value of which was almost entirely derived from traveling, hotel stays, dining out and shopping.

The Zacks Consensus Estimate for current-year earnings has risen 2.4% over the past 30 days. The company's expected earnings growth rate for the current year is 41.01%. In the past year, this currently Zacks #3 Ranked company has surged 76.9%.

Discover Financial is a direct banking and payment services company in the United States.  Its strong direct banking business, global expansions and strong balance sheet remain long-term drivers. The pick-up in travel is expected to help the company continue its rally. It is ramping up travel sops to encourage people to go for outings.

Over the past 30 days, the stock has witnessed its 2021 earnings estimate move 1.3% north. Its expected earnings growth rate for the ongoing year is 272.2%. In the past year, this presently Zacks Rank #2 company has skyrocketed 145%.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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