PreMarket Prep Stock Of The Day: American Express

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

American Express Company AXP, the PreMarket Prep Stock Of The Day, reported quarterly earnings Friday after a relatively quiet week in the markets that saw several earnings releases both good and bad. 

AmEx A Wall Street Darling — Until Now 

American Express did more than just participate in the raging bull market from early 2016 until February 2020. After finding a bottom in February 2016 at $50.27, it embarked on a major rally along with the broad market.

With very few hiccups along the way, AmEx peaked in January at $138.13 and matched that high in February, trading up to $138.04 before crumbling. From peak to trough, the issue notched a 175% gain as opposed the S&P 500 index's return of only 75%. 

More Gain On The Way Up, More Pain On The Way Down

When the S&P 500 index began to unravel in mid-February, so did shares of American Express. The company handsomely overperformed on the upside, and it performed worse during the market retreat.

While the S&P 500 index shed 35% from it February hgh to its March low, American Express dropped from $138.13 to $67, or a 51% decline.

AmEx Has Muted Bounce Off March Low

American Express bottomed a few days ahead of the index, on March 18 at $67. That comes in just ahead of its November 2016 low of $65.03.

In just over a month, the index has recouped half its losses from the sell-off and is attempting to improve on it.

Meanwhile, American Express has recovered less than half of its decline: $99.56 stands as the high versus the key retracement level of $103.

More concerning is that while the index is maintaining its gains from the recent downturn, American Express is closer to its low for the move as opposed to its rebound high.

AmEx Moving Forward

Before the open Friday, American Express reported a first-quarter adjusted EPS beat of 56 cents, but came up shy on sales by $340 million.

At this time, the Street is focusing on the revenue shortfall, as the issue was trading slightly negative at $82.45 at the time of publication Friday afternoon. 

The simple fact, that the issue has undeformed relative to the market on the recent decline and rebound may be a warning signal for investors. In other words, if a recession comes to fruition and the broad market declines, American Express could get hit even harder. 

Conversely, if the market continues to rebound, the issue may not fully participate in the upside. 

At the least, the impact of the COVID-19 crisis has put a crimp in consumer spending for now, which translates to less revenue for companies in the credit card space.