Citigroup Analyst Sees Limited Near-Term Upside For American Express Despite Positive Long-Term Outlook - Here's Why

Citigroup analyst Keith Horowitz initiated coverage on American Express Co AXP Monday with a Neutral rating and a price target of $250.

American Express has the tenets of an attractive long-term core holding given the combination of an attractive business model in a growth market led by a strong management team, Horowitz said.  

But from a tactical perspective, the analyst did not see outsized near-term upside to warrant a Buy rating, as he noted that the valuation multiple has been set fairly high. The stock is trading lower Tuesday.

The analyst’s EPS estimates are slightly higher than the consensus (VisibleAlpha), but he arrived at them differently. Lower revenue (mostly due to other fees, followed by NII and discount revenue) offset lower expenses, as he noted that American Express has the flexibility to hit its mid-teens EPS growth target in the near/intermediate term.

Recent reports indicated EBay Inc’s EBAY plans to dump American Express cards on its platform due to the exorbitant fees.

In April, American Express reported first-quarter revenue (net of interest expense) growth of 11% year-on-year to $15.80 billion, marginally beating the analyst consensus estimate of $15.79 billion. EPS of $3.33 beat the analyst consensus estimate of $2.95. 

Price Action: AXP shares are trading lower by 2.78% at $225.98 at the last check Tuesday.

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