In a research report released Sunday, Pacific Crest analyst Josh Beck highlighted American Express Company's (NYSE: AXP) appealing valuation, but concerns are drawn on the company's revenue growth.
The analyst initiated coverage on the stock with a Sector Perform rating.
American Express has reported relatively flat revenue growth in recent quarters, Beck said, causing him to lean toward seeking signs of momentum due to the companies recent innovations.
The Pacific Crest analyst noted AmEx historically reports solid EPS growth, with 11 percent EPS growth in 2013. Pacific Crest's American Express model demonstrates the company's EPS creates flexibility for future terms.
The progress of revenue growth depends on the company's ability to expand its brand, according to Beck. American Express ROA of 4.1 percent makes it one of its industries leaders, compared to Discovers 3.5 percent and Capital One's 1.2 percent.
Beck highlighted American Express' plans to expand its product reach to new segments through its new partnerships, products, and innovations present a $500 billion opportunity in the long-run.
Long-term innovations that present opportunity for American Express:
- $300 billion SMB spending opportunity (assuming 7%
- $150 billion small merchant opportunity (nearly 10% penetration)
- $80 billion prepaid opportunity (nearly 10% penetration)
Despite the bullish report release, shares of American Express open slightly lower Monday declining nearly 70 basis points, shares floating around $94.20 a share.
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