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…