American Express (AXP) followed in Visa's (V) steps and announced a digital payment and commerce platform dubbed Serve, which enables the consumers to make purchases and person-to-person payments online via mobile phones and at merchants that accept American Express cards. MasterCard (MA) is also planning to launch its own offering for personal payments.

We estimate that American Express derives 73% of our $49.61 price estimate from card transaction and execution fees while Visa derives almost 29% of its $85.03 Trefis price estimate from transaction fees.

Symantec (SYMC) is the leader in the security software market and competes with McAfee -- which was recently acquired by Intel (INTC) -- as well as with Computer Associates, AVG, TrendMicro and Kaspersky Labs. Symantec recently released a report in which it noted that cyber attack tool kits have become more accessible and much easier to use. This report followed incidents in December in which credit card giants Visa (V) and MasterCard (MA) were targeted by cyber attacks.

While such cyber attacks are dangerous for businesses and individuals, they create new business opportunities for antivirus software companies like Symantec, as demand for these products increases. We estimate that security software (for both consumers and businesses) constitutes roughly 50% of our $21.36 price estimate for Symantec stock, while storage software effectively makes up the balance. Our price estimate for Symantec stock is about 20% above the current market price.

Founded in 1950, New York-based American Express (AXP) is a leading global financial services company offering card payment products and travel-related services to consumers and businesses across the globe. It is now the third largest player in the US in terms of card transaction volumes, after Visa (V) and MasterCard (MA). It also competes with other financial institutions that have credit card services like Discover Financial (DFS)and Capital One (COF).

What differentiates American Express from MasterCard and Visa is its relatively more affluent customer base, which it maintains by offering generous benefits and reward programs. Since American Express brings higher spending consumers to merchants, it can charge a higher commission (known as the interchange fee) on sales. Also, unlike Visa and MasterCard, American Express only issues charge and credit card products but not debit cards, which have been gaining widespread acceptance over the past couple of years. With these critical differences in mind, we explore the opportunities that lie ahead for American Express in an evolving macroeconomic environment.

Our price estimate is $47.16, which is just slightly higher than the current market price.

Impact of Regulatory Reforms

The Obama Administration in February 2010 passed the Credit Card Accountability, Responsibility and Disclosure Act, or the CARD Act which enforces more disclosure about interest rates, caps on service fees, grace periods and also makes it difficult for people under the age of 21 to obtain cards. All this is expected to negatively impact the growth in the number of cards in use but lead to lower net write-off rates and defaults by card members.

The Durbin Amendment, enacted in July 2010, granted the Fed the power to control the levels of this fee. In December, the Fed enforced one such limit - 12 cents per debit card transaction. While this adversely affects the two largest card payments-processing networks Visa and MasterCard, which also issue debit cards, we believe it presents upside opportunity for American Express as credit cards would gain prominence over debit cards, at least from the issuers' end.

Improving Economic Conditions

The macroeconomic conditions are improving in the US, albeit at a slow pace. The unemployment levels are still close to historical high levels but on a downward slope, declining from 9.8% in November 2010 to 9.4% in December 2010. Consumer spending has picked up and so have the corresponding card transactions.

Household purchases, which constitute about 70% of the economy, grew at 4.4% in December 2010, the highest since the first quarter of 2006.American Express' card delinquency rates (the proportion of outstanding balances past the due date to total balances) continues to decline month on month to 2.1% from 2.5% in the previous quarter. Charge-offs (the loans deemed uncollectible and hence, written-off) also declined from 5.2% to 4.4% over the same period. Improvements in macroeconomic conditions hint at more relaxed card-issuing criteria and higher credit limits.

If spending increases more than we currently forecast, this could improve our price estimate. Drag the trend line in the modifiable chart above to see the impact. For example, a 5% increase in annual spending in 2012 per customer translates to around a 2% improvement in our price estimate.

See our estimates for American Express.

Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.

I first discussed MasterCard Inc. (MA) here on April 13, 2009, at a price of $176.06, and shares have vectored toward $250 resistance after a dip to $215 this winter. I obviously still like the business model at this stage.

Look for MasterCard to post an impressive 9% to 12% revenue increase in 2011 and a 7% to 9% gain in 2012. MasterCard has emerged from the nation's worst recession in more than 25 years in enviable shape, even amid the frugal consumer era that's likely to restrict U.S. consumer spending. Look for transaction growth to continue, as a result of the U.S. and global trend toward increased use of credit cards.

Are credit card rates too high? The answer is a resounding YES! The Federal Reserve just gave the banks $600 billion in cash in the form of a second round of quantitative easing. What are they doing with it? Raising the rates on credit cards, of course, so they can turn that $600 billion into $1.2 trillion in four years.

You are probably wondering how they are doing this. It's very simple. If you use the rule of 72s, at 18%, money doubles itself every four years (you divide 72 by the rate of interest).

Friday's fourth-quarter GDP numbers offered more evidence that the economy is picking up steam, but one of the biggest obstacles to the recovery remains the stubbornly high unemployment rate. We'll find out whether there's been any movement on that front when employment data for January comes out this week. The Challenger Job-Cut report and ADP employment data are due Wednesday, and the government's unemployment rate on Friday. Another mild increase in jobs is expected, in line with the three-month average, but not enough to significantly reduce the unemployment rate.

Also look for the ISM manufacturing and nonmanufacturing indexes this week, as well as the Chicago PMI and the New York NAPM index. And Fed Chairman Ben Bernanke will speak to the National Press Club on Thursday.

American Express (AXP) was not on Wall Street's list of best buys today. The market is a few minutes away from closing as I write this, and I see that the shares are off by over 2% to $44.82. Volume is quite high.

Should investors be considering this credit-and-charge-card entity for their portfolios? Well, the stock is closer to the 52-week high of $49.19 than it is to the 52-week low of $36.60, but the twelve-month chart shows that the shares have been bouncing around in that somewhat narrow range rather vigorously.

It's not enough to be on every metropolitan street corner; now Starbucks (SBUX) is trying to be even bigger (in one sense of the word) -- and faster, too. Thirsty folks longing for a Big Gulp­-style coffee beverage are in luck as the Seattle-based coffee chain is set to roll out its new "Trenta" size for iced drinks.

The new size, seven ounces bigger than the Venti, will be 31 ounces. Trenta, by the way, means "thirty" in Italian. It's also a valley in Slovenia and a small town in the Italian province of Cosenza. This new size trumps Dunkin Donuts, which offers its iced beverages in 24-ounce serving sizes.

Stocks hit what appears to be a 2-year high on the DJIA and NASDAQ today as economists and allocation experts keep raising targets for 2011. The jobless claims data was not enough to unravel markets and Moody's issuing additional warnings on Spain and Greece failed to dash the ambitions of the bulls. Even after bond yields challenged 7-months highs briefly this morning and even after more insider trading arrests were announced, the bulls still won.

Here were today's unofficial closing bell levels:

Dow Jones 11,499.25 +41.78 (0.36%)
S&P 500 1,242.87 +7.64 (0.62%)
Nasdaq 2,637.31 +20.09 (0.77%)

Top Analyst Upgrades & Downgrades

MasterCard (MA) was higher this afternoon as market participants evaluated the credit-card company's most recent quarterly release. Shares were up 2.5% to a quote of $245.02.

The 52-week high for the stock is $269.88, so one could look at the situation as having room to grow (thankfully, the current share price is comfortably above the 52-week low of $191). The one-year chart, however, might offer some cause for concern. The stock does seem to want to make a comeback, but the image nevertheless is a bit tough to examine.

It will be a busy week. Republicans are poised to gain control of the House of Representatives and gain governorships in Tuesday's mid-term elections. Also, the Federal Reserve is expected to announce another round of quantitative easing Wednesday, following the FOMC meeting. Major retailers are scheduled to report October same-store sales Thursday, while the October unemployment rate, announced on Friday, is expected to remain at 9.6%.

Toyota's (TM) fiscal second-quarter results will be one of the highlights on the earnings front this week. After three periods of way underestimating Toyota's earnings, have the analysts surveyed by Thomson Reuters got it right this time? The stock sure could use a boost. Teva Pharmaceuticals (TEVA) is in a similar situation; i.e., high expectations for this week's quarterly results but a stock in need of a boost. Marathon (MRO) and Starbucks (SBUX) are also expected to post strong earnings growth this week, but both stocks are riding high.

The earnings crunch continues this week, and analysts surveyed by Thomson Reuters are anticipating lots of strong quarterly reports.

For example, year-over-year earnings growth from big oil Chevron (CVX), ConocoPhillips (COP), ExxonMobil (XOM) and Royal Dutch Shell (RDS.A) are expected to be in double digits. The same is true of many other energy and mining concerns reporting this week: Allegheny Technologies (ATI), Alliant Energy (LNT), Arch Coal (ACI), Cliffs Natural Resources (CLF), CMS Energy (CMS), CONSOL Energy (CNX), DPL (DPL), Hess Corp. (HES), Minerals Technologies (MTX), Pioneer Natural Resources (PXD), PPL Corp. (PPL), Southwestern Energy (SWN), Total (TOT), Whiting Petroleum (WLL), Williams Companies (WMB) and Wisconsin Energy (WEC).

Discover Financial Services (DFS) is trading higher this afternoon after the credit-card entity reported numbers for the fiscal third quarter. At the time of this writing, the stock was up 2.4% to $15.95. Volume was very strong.

The shares have traded in a narrow range over the last twelve months. The 52-week low is $12.11 while the 52-week high is $17.36. The chart shows a nice trading vehicle for those who like to buy and sell on a short-term basis.

"Benjamin Graham has been recognized for decades as the father of value investing; Warren Buffett is known as the Oracle of Omaha for his superior investing skills," asserts J. Royden Ward, adding, "For this report, we combine Warren Buffett's and Ben Graham's criteria for choosing stocks.

The advisor reviews Abbott Laboratories (ABT), Coach (COH), Intel (INTC), Mastercard (MA), Microsoft (MSFT) and Tupperware Brands (TUP).

The latest Beige Book from the Fed showed that growth is definitely decelerating. The good news is that even the pygmies have figured that out by now. Stock traders and bond traders have been fighting over whether the slower growth means a double-dip recession or just anemic growth. There were only a few reports to watch, but many stocks and sectors were on the move.

Here are today's unofficial closing bell levels:

Dow Jones 10,387.54 +46.85 (0.45%)
S&P 500 1,098.90 +7.06 (0.65%)
Nasdaq 2,228.87 +19.98 (0.90%)

Top Analyst Upgrades & Downgrades