On Thursday, Compass Point adjusted its financial outlook for shares of American Express (NYSE:AXP), revising the price target to $315 from the previous $325 while maintaining a neutral stance on the stock.
The adjustment reflects a nuanced view of the company's performance and future expectations. According to InvestingPro data, American Express has demonstrated remarkable strength with a 55% return year-to-date, and analysis suggests the stock is currently trading near its Fair Value.
The firm's analysis took into account several key factors influencing American Express's valuation. The revised price target comes despite a slight increase in core earnings per share (EPS) estimates for the fiscal years 2024 through 2026.
The new EPS forecasts are set at $13.41, $15.42, and $17.75, up from the prior estimates of $13.36, $15.40, and $17.65, respectively. With a current P/E ratio of 21.6x and strong financial health metrics, InvestingPro analysis reveals 10+ additional key insights available for subscribers.
This modest uptick in EPS expectations is attributed to management's recent disclosures regarding a year-over-year uptick in consumer retail card spending. This surge has led to higher than anticipated fee income, which is a significant contributor to American Express's revenue stream.
The report by Compass Point includes a detailed analysis of American Express's latest monthly credit and loan growth statistics, specifically for the month of November. Moreover, it encompasses a summary of management guidance, integrating updates from management's appearances in the third quarter of 2024, as well as insights from a conference held last week.
Lastly, the report presents updated monthly credit trends charts. These charts suggest a gradual stabilization in credit trends, which is a positive sign for the company's financial health. The updated model estimate highlights were also part of the comprehensive review conducted by Compass Point, shedding light on the company's financial trajectory.
In other recent news, American Express has been under the spotlight concerning its financial performance and regulatory actions. The Consumer Financial Protection Bureau (CFPB) has taken measures against American Express for illegal practices related to credit card rewards programs.
In terms of financial performance, American Express reported strong third-quarter earnings, surpassing expectations with earnings per share (EPS) of $3.49 and revenues totaling $16.6 billion, marking an 8% increase year-over-year. The company also raised its full-year EPS guidance to between $13.75 and $14.05.
Moreover, the company disclosed its U.S. Consumer and Small Business Card Member loan delinquency and write-off statistics. As of November 30, 2024, American Express reported total U.S. Consumer Card Member loans at $89.3 billion, with loans that are 30 days past due representing 1.4% of the total. The net write-off rate for principal only was 2.0% in November.
Analysts' opinions on American Express have been varied. TD Cowen maintained a hold rating on the company's shares, raising the price target to $268 from $260. Baird increased its price target for American Express to $240 from $215, while maintaining an underperform rating.
Meanwhile, BTIG reiterated its sell rating on American Express, maintaining a $230 price target. These are recent developments that highlight the dynamic changes within the financial industry.
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