The Risks For American Express Are Priced In, Analyst Says In Upgrade

Jayson Derrick

Mon, Feb 12, 2018, 1:36 PM

In this article:

Shares of American Express Company (NYSE: AXP) have lost more than 6 percent since the start of 2018. and one Wall Street analyst said the multiple risks faced by the company are discounted in the stock.

The Analyst

Nomura Instinet's Bill Carcache upgraded American Express Co. from Neutral to Buy with an unchanged $108 price target.

The Thesis

Nomura Instinet's Buy rating is predicated on, at the very least, the charge card issuer meeting expectations, Carache said in a Monday note. Multiple negative catalysts are priced into the stock at current levels, he said.

The analyst's estimates assume AmEx will suspend its stock buyback for 2018 as it regroups after charges related to the tax legislation signed by President Donald Trump.

Carache named the following as risks for AmEx:

Slowing earnings per share growth.
"Growth math" headwinds.
An increased reliance on spread lending.

AmEx's positives include the following, Carache said:

A healthy macroeconomic backdrop.
Expectations for a stable growth revenue profile ahead.
Limited co-brand renewal risk in light of recent signings.

AmEx, along with other credit card stocks, is "oversold" — and if the company merely meets the Street's EPS estimates, the stock could move higher by 18 percent and trade at a 13.6x multiple on 2019E EPS, Carache said.

Price Action

Shares of American Express were up nearly 4 percent early Monday afternoon.

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Latest Ratings for AXP

Feb 2018	Nomura	Upgrades	Neutral	Buy
Feb 2018	Morgan Stanley	Maintains	Equal-Weight	Equal-Weight
Jan 2018	JP Morgan	Downgrades	Overweight	Neutral

View More Analyst Ratings for AXP
View the Latest Analyst Ratings

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