American Express (NYSE:AXP) shares experienced an uplift on Monday after the financial services corporation announced a new feature that allows cash-back cardholders to redeem their Reward Dollars directly on Amazon (NASDAQ:AMZN). The innovative option offers a one-to-one value ratio, enabling customers to apply their rewards for full or partial payment when shopping on Amazon's website or through its app.
The move is seen as an effort to enhance customer loyalty, tapping into data suggesting that 65% of credit or debit card users show a preference for brands where they hold loyalty memberships and value personalized reward schemes. To benefit from this new feature, American Express cardholders must link their cards to their Amazon account and select "Reward Dollars" as their payment method at checkout.
This strategic initiative comes at a time when consumer financial pressures are mounting, with many Americans reportedly living paycheck to paycheck and feeling economically worse off than in the previous year. Nonetheless, there is a persistent trend of overspending during the holiday season, which this partnership could potentially capitalize on.
Wall Street analysts are currently maintaining a Hold consensus on AXP stock, which has seen an annual growth rate of 8.48%. The average price target for American Express stands at $176.38, suggesting an upside potential of approximately 8%.
Prior to Monday's announcement, October's earnings materials from American Express had already revealed an increase in network billed business by 7%, amounting to $420 billion, with leisure spending up by 13%. Additionally, a partnership development in July between Fiserv (NYSE:FI) and Amazon through the uChoose rewards program was highlighted by Rajeev Yerukalapudi. He underscored the significant value consumers place on having choices in how they redeem points. This collaboration also allows customers to use points at Amazon checkout, supporting research from Banyan that tailored rewards can strengthen customer loyalty.
InvestingPro Insights
In light of the recent developments, InvestingPro data and tips provide valuable insights into American Express and Amazon.
For AXP, InvestingPro data shows a market cap of 119.45B USD and a P/E ratio of 15.42. The P/E ratio over the last twelve months as of Q3 2023 is 14.27, indicating a stable earnings performance. The company has also shown promising revenue growth of 9.58% over the past year, reaching 54.38B USD as of Q3 2023.
InvestingPro tips for AXP highlight the company's high earnings quality, with free cash flow exceeding net income, and a strong return on invested capital. The company has maintained dividend payments for 53 consecutive years, underlining its financial stability. Despite some analysts revising their earnings downwards for the upcoming period, the company has shown a strong return over the last month and is expected to remain profitable.
For AMZN, InvestingPro data reveals a market cap of 1510.0B USD and a high P/E ratio of 74.57, reflecting its strong market position. The company's revenue growth is robust, with a 10.32% increase over the last twelve months as of Q3 2023, reaching 554.03B USD.
InvestingPro tips for AMZN point out that the company is expected to grow its net income this year and has seen many analysts revise their earnings upwards for the upcoming period. AMZN has also seen a strong return over the last month and is projected to remain profitable.
For those interested in more in-depth insights, InvestingPro offers additional tips for both AXP and AMZN. Currently, there are 13 more tips available for AXP and 15 more for AMZN. These are part of the InvestingPro product, which is now available at a special Black Friday discount of up to 55%.
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