BofA Securities analyst Mihir Bhatia upgraded American Express Co (NYSE:AXP) from Neutral to Buy and lowered the price target from $325 to $274 Friday.
Bhatia noted the current downtick offers long-term oriented investors an opportunity to buy a high-quality company at a reasonable valuation.
To be sure, the macro environment is uncertain and GDP growth is likely slowing. This is a headwind for revenue growth, the analyst noted.
Also Read: American Express Analysts Expect Gains From Strong Card Spending
The analyst added that American Express’ high-quality customer base should drive more durable earnings while keeping credit losses in check.
American Express’ best-in-class management has been adept at navigating prior downturns, and Bhatia noted this time will be no different.
The combination of a spend-centric model, super-premium cardholders and expense flex positions American Express to have decent earnings durability. Rewards costs will flex with cardholder spending and management has also expressed an ability to pull marketing cost levers to defend EPS. Notably, American Express shares have outperformed other card issuers and the S&P 500 in prior periods of macro stress.
Spending is slowing, but the analyst predicts that higher-income consumers, who comprise American Express’ customer base, will prove to be more resilient from a credit and spending perspective.
Bank of America aggregated credit and debit card data, which shows that higher-income households have had higher card spending growth for more than a year than middle -- or lower-income peers. Additionally, commentary from Delta (American Express’ largest partner) pointed to spending on the American Express co-brand cards up double digits in the first quarter of 2025.
Given tariff-related uncertainty and the increasing likelihood of a GDP slowdown, Bhatia lowered his revenue growth and EPS forecast to 7.2% and $14.76, respectively, for 2025 from 8.3% and $15.23 prior. He also increased his credit reserves to account for more stressed macro scenarios, but given stable delinquency data, Bhatia did not change his loss forecasts.
The price target aligns with the longer-term average and reflects the less optimal spending backdrop, offset by a faster EPS growth algorithm.
American Express reports results pre-market on April 17.
For the first quarter, Bhatia noted American Express’ results will be relatively in line, though he is a touch below the Street on first-quarter billings (5.1% growth versus consensus at 5.9%) and has a larger reserve build. American Express’ full-year EPS of $15-$15.25 seems more defendable, though Bhatia is a touch below the low end at $14.76 (consensus at $15.24).
AXP Price Action: American Express stock is up 0.87% at $249.04 at publication Friday.
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