On Monday, Citi analyst Keith Horowitz maintained a Neutral rating on American Express (NYSE:AXP) stock, with a steady price target of $300.00. American Express shares declined slightly in recent trading, falling approximately 0.6% compared to the Bank Index (BKX), which rose about 1%. The stock has experienced a significant -14.84% decline year-to-date, despite maintaining strong fundamentals with a PEG ratio of 0.97, suggesting potential undervaluation according to InvestingPro analysis. This performance is attributed to a reported earnings miss and concerns regarding consumer spending and lower fees.
American Express’s first-quarter earnings showed a 10-cent core pre-provision net revenue (PPNR) shortfall against consensus, primarily due to decreased discount fees and higher variable customer engagement costs. The company maintains a strong financial position, earning a "GOOD" overall health score from InvestingPro, with revenue growing 9.05% over the last twelve months. Despite this, the company’s management reiterated its 2025 guidance, which now includes an increased projected peak average unemployment rate of 5.7%. The guidance remains contingent on the macroeconomic environment.
Management’s outlook remains positive, noting consistent consumer spending in the second quarter, aligning with first-quarter levels, even amidst growing economic uncertainty. The company also saw robust new net account (NNA) growth of approximately 5%, a rise from 3-4% in the second half of 2024.
In light of the uncertain economic landscape, Citi has adjusted its expectations for American Express, projecting slower billing growth and consequently lower fee income. Additionally, Citi anticipates a rise in provisions due to an increase in net write-offs. However, these factors are expected to be somewhat balanced by favorable net interest income (NII) tailwinds.
While Citi believes that American Express’s earnings per share (EPS) guidance is attainable under various scenarios, the firm sees limited potential for stock price appreciation. Citi suggests that there are other investment opportunities in the market that may offer better value given the current valuation of American Express stock. Notably, the company has maintained dividend payments for 55 consecutive years, demonstrating long-term stability. For deeper insights into AXP’s valuation and growth prospects, including exclusive financial metrics and expert analysis, explore the comprehensive Pro Research Report available on InvestingPro.
In other recent news, American Express reported its first-quarter 2025 earnings, showcasing an earnings per share (EPS) of $3.64, which exceeded the forecasted $3.48. The company’s revenue reached $17 billion, aligning with expectations and marking an 8% increase compared to the previous year. Despite surpassing EPS expectations, the stock experienced a decline in pre-market trading. American Express added 3.4 million new cards, with card member spending growing by 6%, highlighting successful strategies targeting millennials and Gen Z customers. The company maintains a full-year revenue growth outlook of 8-10% and plans to continue investments in technology and product innovation. Analysts from firms like KBW and Deutsche Bank (ETR:DBKGn) inquired about potential economic uncertainties, with American Express executives expressing confidence in their ability to navigate challenges. The company also emphasized its commitment to long-term growth and enhancing customer value propositions.
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