American Express: 30% Down From Peak But Still Not Cheap

(Preview) Company Update (AXP US) (Neutral)

Summary

• AXP shares have fallen 30% from their peak in February and underperformed both Mastercard and Visa year-to-date.

• AXP volume has continued to recover, but earnings are lower than in 2019 and lagged Mastercard's and Visa's, due to higher expenses.

• Management mid-term targets see AXP growing revenues in excess of 10% and EPS at mid-teens from 2024, but we're not convinced.

• AXP expects growth to accelerate above pre-COVID levels even as Marketing spend is slowed, which is difficult with strong competition.

• At $140.40, AXP shares have a Price/Book of 5.1x, a P/E of approx. 17x and a Dividend Yield of 1.5%, not particularly cheap. Avoid.

Introduction

We review our Hold rating on American Express Company after shares have fallen 30% from their peak in February. Year-to-date, AXP’s share price has fallen 17%, underperforming both Visa (down 10%) and Mastercard (down 14%), and is about 20% below the level where we had been reiterating our Hold rating in the past year.

Since we initiated our Ne…