Why JPMorgan Is Bullish On American Express, Bearish On Rocket Companies

Multiples of consumer finance companies rebounded in 2023, along with a broader rally in the stock market.

The credit cycle does not seem to be reaching a true peak, rather a “sustained plateau with elevated DQs/NCOs,” according to JPMorgan.

The Consumer Finance Analyst: Richard Shane upgraded the rating on American Express Company AXP from Neutral to Overweight, while raising the price target from $167 to $205. The analyst meanwhile downgraded the rating for Rocket Companies Inc RKT from Neutral to Underweight, while raising the price target from $8.50 to $10.50.

The Consumer Finance Thesis: DQs and NCOs could remain elevated into 2025, rather than inflecting down as was earlier expected, Shane said in the note.

Check out other analyst stock ratings.

American Express is a “safe haven from deteriorating household balance sheets,” the analyst wrote. “We believe lower/middle income borrowers are facing pressure from depleted pandemic savings and the lingering effects of high inflation, and expect AXP to offer investors shelter from these forces,” he explained. Shane named American Express as the top pick for 2024.

The analyst stated, however, that Rocket Companies' stock “already fully discounts potentially higher volumes in 2024/25.” While saying that the company is “a long-term winner in the mortgage sector” and could experience an earnings recovery “as lower rates drive higher refi volumes,” the analyst notes that the current valuation of the stock already reflects the “best case TAM, share and margin scenarios.”

AXP, RKT Price Action: Shares of American Express were up 0.8% to $187.82, while shares of Rocket Companies were down 3.3% to $12.90 at the time of publication Thursday.

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