On Friday, Monness Crespi Hardt raised its rating on American Express (NYSE:AXP) stock from Neutral to Buy. The firm highlighted several factors contributing to the upgrade, including the company's resilience due to its affluent customer base and the potential for loan growth. The firm also noted the opportunities for American Express to reprice products, with 40 product refreshes anticipated this year.
The analyst pointed out that the high-end consumer base of American Express has demonstrated spending and lending patterns that position the company well in the event of economic softness. The firm expects that the interest rate environment, which is predicted to remain elevated, will not disproportionately affect American Express given its liability sensitivity.
Additionally, the firm anticipates that American Express will benefit from a series of product refreshes, such as the recently announced Delta portfolio update in late March 2024, which is expected to boost net card fees. The analyst believes that newer customer segments are still maturing in terms of spending and lending, which should lead to consistent fee generation and potentially higher loan growth compared to previous years.
Monness Crespi Hardt also mentioned that regulatory changes and competitive dynamics in the payment network industry could favor American Express. The firm referred to the potential revision of Basel III regulations that may alleviate concerns over capital buffers and the impact of heightened competition due to recent partnerships and agreements within the industry.
Finally, the firm expressed confidence in the commercial segment's potential for recovery in the latter half of 2024. Despite recent softness in billed business for commercial card members, the demand from new card members remains robust, and same store sales are expected to improve with easier comparisons year-over-year.
InvestingPro Insights
As American Express (NYSE:AXP) receives a positive outlook from Monness Crespi Hardt, real-time data from InvestingPro complements this perspective with a detailed snapshot of the company's financial health. American Express is trading at a high P/E ratio of 19.65, which is above the industry average, indicating that the market has high expectations for the company's future earnings growth. Despite this, the company's strong track record of profitability over the last twelve months and its status as a prominent player in the Consumer Finance industry are factors that could justify the premium valuation. Additionally, American Express has demonstrated a robust return over the last three months, with a price total return of 16.51%.
InvestingPro Tips highlight the company's consistent dividend payments for 54 consecutive years, underscoring its commitment to returning value to shareholders. Furthermore, analysts predict the company will remain profitable this year, which is supported by a solid revenue growth of 9.69% over the last twelve months as of Q1 2023. For investors interested in a deeper dive, there are additional InvestingPro Tips available, providing a more comprehensive analysis of American Express's financials and market position.
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