On Monday, Monness, Crespi, Hardt maintained a Buy rating on American Express (NYSE: NYSE:AXP) shares and increased its price target to $300 from the previous $265. The revision reflects a positive outlook based on the company's affluent customer base and its ability to manage a tougher spending environment effectively.
The firm's analyst adjusted the estimates for American Express, introducing projections for calendar year 2026 while slightly moderating the expectations for calendar year 2025. The updated estimates are based on approximately 20 times the projected earnings per share for calendar year 2025.
Despite acknowledging a cautious stance on the overall spending climate, the analyst expressed confidence in American Express's resilience compared to its peers due to its wealthier cardholder demographic.
American Express is seen as having various operational levers to maintain a mid-teens earnings per share compound annual growth rate, even in the face of potential spending slowdowns in sectors like travel and restaurants.
The analyst highlighted that while there has been a softening in spending within these categories since early 2024, American Express's exposure to higher discretionary spending could mean that it is better positioned than open loop networks like Visa (NYSE:V) and Mastercard (NYSE:MA), which are more reliant on less affluent customers.
The analyst also pointed out that American Express's balance sheet remains strong, with leading cardholder metrics such as low delinquency and charge-off rates. Management at American Express has indicated expectations for loan growth normalization by the year's end while maintaining double-digit ranges and stable write-off rates, as seen in the second quarter of 2024 financial results. This strategic communication from management supports the belief in the company's continued stability in spend volumes.
In other recent news, American Express has been the focus of several major developments. The company reported a significant 44% year-over-year earnings growth in the second quarter, marking a record high in revenue, and adjusted its full-year earnings per share (EPS) guidance to $13.30 - $13.80.
JPMorgan downgraded American Express from Overweight to Neutral, citing limited upside potential, but raised the price target to $286 from $268. Meanwhile, RBC Capital Markets retained an Outperform rating and increased the share price target to $267, acknowledging the company's steady revenue and well-managed expenses.
American Express also amended its bylaws to provide additional clarity on shareholder voting processes, enhancing the transparency of voting outcomes on shareholder resolutions and other corporate decisions. Seaport Global Securities maintained a Neutral rating on American Express, highlighting growth trends in the company's portfolio and credit quality that aligns with or slightly surpasses pre-pandemic levels.
These are recent developments that have been shaping the narrative around American Express. The company's U.S. consumer card loan portfolio saw a year-over-year increase of 12.4% to $87.3 billion. The company's small business loan portfolio also experienced notable growth, increasing by 22.9% year-over-year to $30.1 billion. However, the Central Bank of Russia revoked the banking license of the Russian subsidiary of American Express, marking the end of the company's direct banking presence in Russia.
InvestingPro Insights
The recent analysis from Monness, Crespi, Hardt aligns well with several key metrics and insights from InvestingPro. American Express's strong market position is reflected in its substantial market capitalization of $196.33 billion. The company's P/E ratio of 20.63 suggests a reasonable valuation, especially considering its growth prospects.
InvestingPro Tips highlight American Express's financial strength and market performance. The company has maintained dividend payments for 54 consecutive years, demonstrating long-term stability. Additionally, AXP is trading near its 52-week high, with a remarkable 84.95% price total return over the past year, reinforcing the analyst's positive outlook.
The company's revenue growth of 9.62% in the last twelve months and a healthy gross profit margin of 55.83% support the analyst's confidence in American Express's ability to navigate challenging spending environments. These metrics, combined with the InvestingPro Tip noting that AXP is a prominent player in the Consumer Finance industry, underscore its competitive position and potential for continued growth.
For investors seeking more comprehensive insights, InvestingPro offers 14 additional tips for American Express, providing a deeper understanding of the company's financial health and market position.
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