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American Express : AmEx Fires Another Shot at Chase's Sapphire Reserve -- Update

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03/29/2017 | 08:47pm CEST
By AnnaMaria Andriotis 

American Express Co. is taking another shot at J.P. Morgan Chase & Co.'s popular Sapphire Reserve card, planning to increase the points it is doling out to consumers who sign up for its Platinum card and spend a lot in the first three months.

AmEx in coming days is expected to increase the points bonus to 60,000, from 40,000, according to a person familiar with the matter. But there is likely to be catch: To get the larger amount of points, card users will have to spend $5,000 in the first three months after receiving the card, up from $3,000 currently, the person said.

An AmEx spokeswoman said, "We've always had competitive sign-up bonuses combined with a range of premium benefits and services."

AmEx's move would come just weeks after J.P. Morgan officially concluded its 100,000-points offer to Sapphire Reserve customers and downgraded it to 50,000 points. Sapphire Reserve cardholders need to spend $4,000 in the first three months to get these points.

Competition between credit-card issuers vying for market share has been growing in recent years. One of the biggest battles is playing out between AmEx and J.P. Morgan with the luxury rewards cards that come with hefty fees and big rewards. These cards are aimed at high spenders, and a points system geared at consumers who will spend a lot on a new card is one of the main tools the lenders are using to lure new card customers.

The battle has been especially bruising to AmEx because of the intense competition it is now facing in a market that it has dominated for decades. Doug Buckminster, president of AmEx's global consumer services group, referred to the Chase Sapphire Reserve launch during a presentation this month as "a full frontal assault" on the Platinum card.

AmEx could roll out the higher points structure on Thursday when new benefits, announced earlier this month, kick in. That is also when its higher annual fee of $550, up from $450, goes into effect for new sign-ups.

This is the third large boost to Platinum rewards that the card company has made since October -- moves that several analysts see as an attempt to fend off competition from the Sapphire Reserve.

AmEx executives have said that the company experienced a small increase in the number of consumers shutting down their Platinum cards during a two-week period after Sapphire Reserve launched last year. But they added that the so-called attrition quickly fell to historically low levels afterward. An AmEx spokeswoman said the company has more Platinum card members today than at any point in the card's history.

Analysts are also concerned about the impact that some of the enhanced rewards will have on the company's expenses. Marketing spending and promotional expenses, which includes sign-up bonuses the company pays out to new card users among other items, hit a record $3.7 billion last year.

Currently, Platinum's 60,000 points are worth $600 when redeemed for airfare and $420 when redeemed for hotels through AmEx's travel agency. Chase's 50,000 points are worth $750 when redeeming for travel, including airfare, hotels and cruises, through Chase Ultimate Rewards.

AmEx's executives say they are more focused on attracting and retaining Platinum users through experiences, including reservations to hard-to-get shows and restaurants as well as access to airport lounges.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com

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Financials ($)
Sales 2017 32 408 M
EBIT 2017 9 613 M
Net income 2017 4 997 M
Debt 2017 -
Yield 2017 1,69%
P/E ratio 2017 13,97
P/E ratio 2018 12,55
Capi. / Sales 2017 2,17x
Capi. / Sales 2018 2,08x
Capitalization 70 419 M
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Mean consensus HOLD
Number of Analysts 32
Average target price 81,0 $
Spread / Average Target 3,5%
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Kenneth Irvine Chenault Chairman & Chief Executive Officer
Jeffrey C. Campbell Chief Financial Officer & Executive Vice President
Marc D. Gordon Chief Information Officer & Executive VP
Charlene Barshefsky Independent Director
Ursula M. Burns Independent Director
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