Warren Buffett has said that the stock market is a voting machine in the short term and a weighing machine in the long term. Today’s market, driven by volatility across the S&P 500, makes this saying more true than ever before, especially as names that would otherwise trade near their highs come down in association with the rest of the market.
Today, one company, in particular, offers investors a chance to take advantage of the market’s irrational reaction to sell everything despite fundamentals and narratives, only because the broader market is coming down.
The opportunity comes through financial sector giant American Express (NYSE:AXP) since its stock is doing the exact opposite of what everyone would expect this company to do during volatile times, which is to act as a safe haven for capital to flow into.
After following the S&P 500 into correction territory, American Express might soon bottom and turn around, especially as other value stocks carrying the same safety and stability characteristics start to break out this week on investors’ preference for hedging.
This theme can be spotted live through the iShares S&P 500 Value ETF (NYSE:IVE) in its three-month outperformance next to the S&P 500 to give the evidence of safety investors need.
Risk-to-Reward Setup Is Fantastic
Considering that American Express stock has sold off by just under 15% in a single month, with 7.1% in the past trading week alone, investors should start to grow excited about the discounts. However, most would run away from a stock that shows them such a bearish chart in the short term, ignoring the fact that a recovery is nearly inevitable.
While some on the bearish side might argue that the stock could still fall further, now that American Express shares are at only 80% of their 52-week highs, they’ve officially entered Wall Street’s definition of a bear market (which is a 20% or more decline from highs). Now, the only thing that changes from bear territory is for the company to turn to bullish territory.
Investors might want to consider that today, as the risk of the stock going lower has been somewhat exhausted. This leaves all the more upside to be had in the coming months, especially as more volatility hits the broader S&P 500 and drives capital to safer places like American Express.
The Market’s Take on American Express
Now it’s time for investors to gauge how the markets feel about American Express stock today, apart from the price action it has been punished with. For this, checking Wall Street analyst ratings, valuations, and recent buying activity can be a good start.
When it comes to analyst ratings, the answer is very clear. Those from Wells Fargo were willing to back American Express through its decline, as they’ve reiterated an Overweight rating on it along with a valuation boost to $370 per share, much higher than their previously set $355 target.
This new valuation for American Express stock implies that it has a rally of up to 42% built into it, not to mention a new 52-week high as well. Investors need to remember that analysts aren’t often willing to boost stocks that have recently been coming down, as they would be risking their reputations and careers, so this one matters all the more.
However bullish this rating may seem, it’s not the only bullish factor out there supporting American Express at this potential bottom. As of February 2025, institutional buyers from UBS Asset Management decided to boost their holdings in American Express by 8.9%, bringing their net position to a high of $1.5 billion today.
This again reiterates that, even as the stock fell by double-digits this month alone, there are still willing buyers and backers ready to take on this name for a potential turnaround shortly. While the overall analyst consensus rating remains a Hold, recent upgrades and institutional confidence suggest that sentiment could be shifting in a more positive direction.
One Worthy Mention: Encrypted Message
There is one last worthy gauge to consider when it comes to stocks like American Express. It is just how much these recent institutions were willing to pay for it when they boosted their holdings to over a billion this quarter. This gauge is the market’s encrypted message hidden in valuation multiples.
For American Express, investors should focus on its price-to-book (P/B) valuations, which stand at 6.1x today, commanding a steep premium over the financial sector’s 2.7x. Now, most would call this expensive and say it could still decline.
However, the reality is that the market will always overpay for stocks it believes will outperform the peer group and the broader market, and American Express’s upside and underlying stability definitely make it a potential upside candidate today.