• Town analyst Arren Cyganovitch downgraded American Express Co. AXP sell from neutral with a price target of $130, down from $159 previously.
  • Citi’s economics team projected a modest slump in the US as its baseline in 2H23, so it seemed prudent to assume a mild recession in its consumer credit stocks.
  • While the recession is likely to be mild, the impact on EPS may be quite significant, due to record credit losses and slightly above average credit losses expected in 2024.
  • As the analyst modeled these impacts, his analysis suggests that much of his coverage over-discounted a mild recession but illustrated stocks that could be challenged, leading to the downgrade.
  • The analyst expects near-term pressure from most members of the group as economic data is likely to deteriorate 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 equal weight.
  • When card issuers report earnings over the next two weeks, DeVries expects second-quarter trends to continue with purchase volumes strong but decelerating slightly.
  • Atlantic Equity Analyst Kunaal Malde cut the price target on American Express to $165 from $175 and reiterated a neutral.
  • Given the growing likelihood of the US and global economies entering recession, he assumed a mild economic slowdown in the 2023 forecast.
  • Payments stocks have started discounting this scenario. Nevertheless, in the short term, he prefers high-quality stocks with attractive valuations and a limited decline from consensus earnings forecasts, such as Visa Inc. V.
  • Price action: AXP shares traded up 2.48% at $140.13 when last checked on Thursday.