4 credit card stocks worth buying this holiday season
Amid concerns that the omicron COVID-19 variant was likely to wipe out the economic recovery, the latest data suggests the omicron variant is less severe than previous variants and is less likely to cause hospitalizations. This is good news for the economic recovery. Consumer spending has grown tremendously since pandemic restrictions were relaxed, supported by government stimulus spending, a strong pick-up in job creation, and substantial pent-up demand created by the pandemic restrictions.
According to a Commerce Department report, consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.6% in November after a slight increase of 1.4% in October. The unemployment rate in the United States was at its lowest level in 21 months, at 4.2%.
In addition, consumer spending is expected to accelerate due to the increase in digital payments, accessible consumer credit facilities and the widespread use of prepaid card services. These factors are expected to drive the growth of the credit card industry, especially during the holiday season. According to a Research and Markets report, the global credit card market is expected to grow at a CAGR of 1.1% to reach 107.69 billion dollars in 2025. Against this backdrop, we think it might make sense to bet on fundamentally sound credit card stocks like Visa Inc. (V), American Express Company (AXP), Capital One Financial Corporation (COF) and Discover financial services (DFS).
Visa Inc. (V)
V is a global payments technology company that enables digital payments between customers, merchants, financial institutions, enterprises, strategic partners and government agencies. It also operates VisaNet, a transaction processing network that enables authorization, clearing and settlement of payment transactions.
On December 20, 2021, V announced that it had acquired Currencycloud, a global platform that enables banks and fintech companies to deliver innovative currency solutions for cross-border payments. In its fiscal fourth quarter, ended September 30, 2021, V’s net sales increased 29% year-on-year to $ 6.60 billion. The company’s non-GAAP net revenue reached $ 3.52 billion, up 42% year-on-year. And its non-GAAP EPS increased 44% year-on-year to $ 1.62.
Analysts expect V’s EPS for the quarter ending March 31, 2022 to rise 20.3% year-on-year to $ 1.66. Its revenue for fiscal 2022 is expected to grow 17.2 percent year-on-year to $ 28.25 billion. It has beaten Street’s EPS estimates in each of the past four quarters. And over the past month, the stock has gained 11.1% going to close yesterday’s trading session at $ 218.17.
V’s strong fundamentals are reflected in its POWR odds. It has an overall rating of B, which is equivalent to a purchase in our proprietary rating system. POWR scores are calculated by considering 118 separate factors, each factor being weighted to an optimal degree.
V has a B rating for feeling and quality. It is ranked n ° 12 out of 54 stocks in the Consumer financial services industry. Click here to see the additional notes of V (Growth, Value, Momentum and Stability).
American Express Company (AXP)
AXP is an integrated payments company providing credit and charge cards to consumers, small businesses, midsize businesses, and corporations around the world. The Company’s products and services are sold to various customer groups through a variety of channels, including mobile apps, affiliate marketing, and third-party vendors.
On December 8, 2021, AXP’s Kabbage launched Kabbage Funding, which offers small businesses flexible lines of credit between $ 1,000 and $ 150,000. AXP’s initiative should ensure that small businesses have access to working capital within minutes of applying without any problems. Thus, the company could see an increase in demand for its solution as companies expand their reach.
AXP’s net income for the fiscal third quarter, ended September 30, 2021, increased 70% year-over-year to $ 1.82 billion. The company’s total revenue, net of interest expense, increased 25% year-over-year to $ 10.92 billion. In addition, its EPS stood at $ 2.27, up 74.6% year-on-year.
For its 2021 fiscal year, AXP’s EPS is expected to increase 155.2% year-on-year to $ 9.62. Additionally, it has beaten consensus EPS estimates in each of the past four quarters. Its revenue for the quarter ending Dec.31, 2021 is expected to increase 22% year-over-year to $ 11.41 billion. The stock has gained 38.6% over the past year to close yesterday’s trading session at $ 163.83.
AXP’s POWR ratings reflect this promising outlook. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system. AXP also has a B rating for sentiment. It is ranked # 13 in the Consumer financial services industry. To view AXP’s other ratings for Growth, Value, Dynamics, Stability and Quality, Click here.
Capital One Financial Corporation (COF)
COF is a diversified financial services holding company that provides a range of financial products and services to consumers, small businesses and commercial customers through digital channels, branches, cafes and other distribution channels. It operates in the credit cards, personal banking and commercial banking segments.
On November 9, 2021, COF announced the launch of its new travel card named Venture X. It allows customers to earn anywhere, with 2x miles on every purchase, enhanced earnings on travel, including 10x on hotels and resorts. rental cars, and 5x on flights booked through Capital One Travel. The best benefits should allow COF to capitalize on pent-up travel demand.
COF’s net revenue for its fiscal third quarter, ended September 30, 2021, increased 6% year-on-year to $ 7.83 billion. The company’s net profit was $ 3.10 billion, up 29% year-on-year. Its EPS increased 34% year-on-year to $ 6.78.
Analysts expect COF’s 2021 fiscal year EPS to rise 416.2% year-on-year to $ 26.74. Its revenue for the quarter ending March 31, 2022 is expected to increase 10.9% year-over-year to $ 7.74 billion. It has beaten Street’s EPS estimates in each of the past four quarters. Over the past year, the stock has gained 51.3% going to close yesterday’s trading session at $ 145.59.
COF’s strong fundamentals are reflected in its POWR ratings. It has an overall rating of B, which is equivalent to a purchase in our proprietary rating system. The stock also has a B rating for value and sentiment. COF is ranked 9th in the Consumer financial services industry. Click here to see the additional COF ratings for Growth, Dynamics, Stability, and Quality.
Discover financial services (DFS)
DFS is a financial services company that provides credit card and electronic payment services, as well as checking and savings accounts. It operates in the digital banking and payment services segments. The company has a strategic network agreement with Arab Financial Services.
On July 13, 2021, DFS and SIBS MB signed a strategic agreement to increase the global acceptance footprint of the two organizations. The deal will likely allow Discover, Diners Club International and network alliance cardholders to use their cards on the SIBS MB network at merchants and ATMs across Portugal.
For its fiscal third quarter, ended September 30, 2021, total DFS revenue, net of interest expense, increased 2% year-on-year to $ 2.77 billion. The company’s net profit was $ 1.09 billion, an increase of 42% year-on-year. Its EPS increased 44% year-on-year to $ 3.54.
For its 2021 fiscal year, DFS’s EPS and revenue is expected to grow 388.6% and 8.9%, respectively, year-on-year to $ 17.59 and $ 12.07 billion. It has exceeded consensus EPS estimates in each of the past four quarters. The stock has gained 31.5% over the past year to close yesterday’s trading session at $ 115.77.
DFS ‘POWR ratings reflect this promising outlook. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system. DFS also has a B rating for sentiment. Within the Consumer financial services industry, it is ranked # 5. To view DFS ‘other ratings for Growth, Value, Dynamics, Stability, and Quality, Click here.
V shares fell $ 0.38 (-0.17%) in pre-market trading on Thursday. Year-to-date, V has gained 0.36%, compared to a 29.41% increase in the benchmark S&P 500 over the same period.
About the Author: Dipanjan Banchur
Since he was in elementary school, Dipanjan had been interested in the scholarship. This led him to obtain a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a keen interest in reading and analyzing emerging trends in financial markets. Following…