American Express: We Missed The Bottom, Now It's Too Expensive (Preview)
Company Update (AXP US) (Neutral)
Summary
At $169.45, American Express stock is now 25% above its pre-COVID peak, and is at 20.7x 2019 EPS - too expensive in our view.
We believe signs of the structural weaknesses we previously identified in American Express's business model are visible in recent results.
2020 and 2021 are likely "lost" years - current 2022 EPS target only implies a low-single-digit CAGR from 2019.
Unlike Mastercard and Visa, American Express has gained little from the pandemic, with a flat card number and volume lower than 2019.
We believe there is a significant likelihood of EPS growth not meeting the double-digit target after 2023, which would lead the P/E to shrink.
Introduction
We review our Neutral rating on American Express after the stock hit a new all-time high this week. We initiated our Neutral rating in March 2019.
We have missed a key opportunity in American Express stock, which has now risen by close to 90% since its 52-week low of $89.11 last October, just before news of the first successful tr…