Citi analyst Arren Cyganovich downgraded American Express Co AXP to Sell from Neutral with a price target of $130, down from $159.
Citi’s economics team has forecast a modest U.S. slump as a base case in 2H23, so it felt prudent to assume a mild recession on his consumer finance stocks.
While the recession will likely be soft, the impact on EPS can be rather significant, coming from record-low credit losses and forecasted slightly higher than average credit losses in 2024.
As the analyst modeled these impacts, his analysis suggests that a good portion of his coverage has overly discounted a mild recession but illustrated stocks that could be challenged, leading to the downgrade.
The analyst expects near-term pressure from most of the group as economic data likely worsens into next year, but within 12-18 months, he saw the potential for a positive pivot.
Barclays analyst Mark DeVries cut the price target on American Express to $145 from $160 and reiterated an Equal Weight.
When the card issuers report earnings over the next couple of weeks, DeVries expects a continuation of Q2 trends with strong but modestly decelerating purchase volumes.
Atlantic Equities analyst Kunaal Malde reduced the price target on American Express to $165 from $175 and reiterated a Neutral.
Given the increasing likelihood that the U.S. and global economies will enter recession, he assumed a modest economic downturn in 2023 forecasts.
Payments stocks have begun to discount this scenario. Still, in the near term, he prefers high-quality stocks with attractive valuations and limited downside to consensus earnings forecasts, like Visa Inc V.
Price Action: AXP shares traded higher by 2.48% at $140.13 on the last check Thursday.
