American Express: Shares Continue To Disappoint After Q3

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

Summary

• AXP bulls tend to focus on its current 15.5x P/E and targeted mid-teens EPS CAGR from 2024, but the stock has lost 4.7% year-to-date.

• AXP earnings have lagged those at Mastercard and Visa since 2019; its shares have also been lagging, despite a lower P/E.

• Competing in card issuance is expensive; AXP had already rebased its earnings downwards in the past few years and may do so again.

• Year-on-year growth rates are flattered by the post-COVID recovery in Travel & Entertainment and a one-off release in capital.

• AXP’s P/E is also flattered by historically low credit costs that could easily reverse in the event of a U.S. recession. Avoid.

Introduction

We review our Hold rating on American Express Company after shares stagnated in the two months following our last update, despite supposedly positive Q3 2022 results on October 21 where full-year guidance was raised.

We initiated our Hold rating on AXP in March 2019, stating our view that its shares should be avoided. Since then AXP shares ha…