On Monday, RBC Capital Markets adjusted its outlook on American Express (NYSE:AXP) shares, raising the price target to $330 from the previous $315. The firm kept its Outperform rating on the stock. The move reflects a positive view of the company's revenue durability, earnings per share (EPS) growth prospects, and expectations for strong credit quality.
According to InvestingPro data, seven analysts have recently revised their earnings estimates upward, with analyst targets ranging from $230 to $371. The stock currently trades at $295.51, suggesting potential upside based on RBC's target, though InvestingPro's Fair Value model indicates slight overvaluation.
Jon Arfstrom of RBC Capital provided insights into the rationale behind the increased price target. He noted American Express as the preferred card company due to its robust revenue base and EPS growth outlook. The analyst emphasized the importance for investors to understand the revenue trajectory, highlighting that American Express's business strategy has led to a diversified revenue mix, not solely dependent on spending trends but also bolstered by lending and membership fees.
This strategy has proven successful, with InvestingPro data showing revenue growth of 8.94% and total revenue reaching $59.24B in the last twelve months. The company maintains a healthy gross profit margin of 55.7% and has demonstrated strong financial health with an overall score of GOOD according to InvestingPro's comprehensive analysis.
The analyst pointed out that American Express managed to surpass its EPS expectations in 2024, even as revenues remained at the lower end of their guidance range. This achievement was seen as a testament to the company's effective management and strategic initiatives.
Looking ahead, RBC Capital's analysis suggests confidence in American Express's long-term revenue drivers. The firm's strategic focus on regular card product updates and enhancing the value proposition for customers has led to lower attrition rates and an expanded cardholder base. Despite a recent moderation in spending, these strategies are believed to be contributing to ongoing momentum within the company.
Furthermore, the analyst observed that the Millennial and Gen-Z segments are showing promising performance, indicating potential growth areas for American Express. With expectations of tailwinds in 2025, the long-term revenue outlook for the company is deemed attractive by RBC Capital, supporting the raised price target.
The company's strong market position is reflected in its $208.18B market capitalization and consistent dividend growth, having maintained payments for 55 consecutive years. For deeper insights into American Express's growth potential and comprehensive financial analysis, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks.
In other recent news, American Express has seen a range of developments. The financial giant reported robust third-quarter earnings with an earnings per share (EPS) of $3.49 and revenues totaling $16.6 billion, an 8% year-over-year increase. Following this performance, the company raised its full-year EPS guidance to between $13.75 and $14.05.
Truist Securities initiated coverage on American Express shares with a Buy rating, citing strengths such as a dedicated high-end customer base and expansive international operations. Contrarily, Compass Point revised the company's price target down from $325 to $315, while maintaining a neutral stance. This adjustment came despite an increase in core earnings per share (EPS) estimates for 2024 through 2026.
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