Back to top

Image: Bigstock

AmEx (AXP) Down 2.7% on Spending Jitters: Wallets on Edge?

Read MoreHide Full Article

American Express Company (AXP - Free Report) stocks fell 2.7% yesterday, following Bank of America Securities analysts downgrading the integrated payments company to Neutral from Buy. Analysts raised concerns as the stock is operating in a challenging spending environment and has a premium valuation, which is limiting its upside potential.

AXP Stock’s Valuation

American Express' valuation seems expensive at the current levels. The stock is now trading at 17.31X forward 12-month price-to-earnings, which is higher than its five-year median of 15.73X and industry average of 13.56X.

Zacks Investment Research Image Source: Zacks Investment Research

Spending Environment

The slowdown in real disposable income growth is likely to constrain spending in big-ticket items and discretionary areas such as entertainment, travel and dining out, which could limit AmEx’s short-term performance. The pandemic-era excess savings are also drying up fast, further affecting spending growth.

Bank of America Securities analysts pointed out that high-end consumer spending is also facing challenges and billings volume growth is expected to remain muted.

AmEx’s Resilience Through Growth Initiatives

All is not lost. Despite the challenging spending environment, the company’s focus on strategic initiatives — like launching new products, enhancing existing features, adjusting prices, and forging key alliances — positions it for long-term growth. Its strong cash flow and emphasis on attracting Millennials and Gen-Z are well-regarded by investors. This will provide some impetus to its U.S. Consumer Services Billed business, so there is no need to feel nervous now.

Let’s look at the estimates.

The Zacks Consensus Estimate for 2024 earnings is pegged at $13.06 per share, indicating a 16.5% increase from the year-ago period. The same for 2025 signals further 14% year-over-year growth. The consensus mark for 2024 and 2025 revenues indicates 9% and 8.7% year-over-year jumps, respectively. AXP beat earnings estimates in three of the past four quarters and missed once, with the average surprise being 7.7%.

AXP’s Price Performance

In the year-to-date period, AmEx shares have gained 31.5%, outperforming the industry’s 3.5% increase and the S&P 500 Index’s 17.9% growth.

Zacks Investment Research Image Source: Zacks Investment Research

Zacks Rank & Key Picks

AXP currently has a Zacks Rank #3 (Hold). 

Investors interested in the broader Finance space may look at some better-ranked players like Jackson Financial Inc. (JXN - Free Report) , WisdomTree, Inc. (WT - Free Report) and HIVE Digital Technologies Ltd. (HIVE - Free Report) . While Jackson Financial currently sports a Zacks Rank #1 (Strong Buy), WisdomTree and HIVE Digital carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Jackson Financial’s current-year earnings is pegged at $18.49 per share, which indicates 44% year-over-year growth. It witnessed two upward estimate revisions in the past 30 days against no downward movement. The consensus mark for JXN’s current year revenues suggests a 116.7% surge from a year ago.

The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 67.6% year-over-year growth. During the past month, WT has witnessed three upward estimate revisions against none in the opposite direction. It beat earnings estimates twice in the past four quarters and met on the other occasions, with an average surprise of 5.9%.

The Zacks Consensus Estimate for HIVE Digital’s current-year earnings suggests a 50.9% year-over-year improvement. During the past month, HIVE has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current-year revenues is pegged at $124.7 million, indicating an 8.9% increase from a year ago.

Published in