Citi Comments On American Express Following Recent Management Meeting

American Express's AXP mgt set a constructive, confident tone emphasizing the momentum AXP had built growing their penetration of high-end spending despite increased competition. Chenault highlighted the fact that 2010's 160 bps improvement in U.S. spending market share to 25.4% was AXP's best year in the past 10+ years. With the business firing on all cylinders, mgt is now focused on building scale and the digital transformation. Investors continue to be focused on AXP's ability to demonstrate positive operating leverage. Mgt noted the high level of customer “engagement” that AXP's rewards program has been building which translates directly to increased use of AXP cards. They continue to seek new ways for cardmembers to redeem rewards points, while keeping the overall cost per point relatively flat over time. Citi senses that investors are increasingly willing to accept that AXP will experience elevated expenses as they invest for growth. While Citi agrees with mgt that the transformation to a truly digital payments company is critical, some investors have highlighted concerns that such a transformation adds risk over the next few years. Citi has a $60 PT and Buy rating on AXP AXP closed Friday at $50.45