Morgan Stanley Initiates American Express At Overweight, 'Sunny Blue Skies Ahead'

Cheryl Pate of Morgan Stanley initiated coverage of

on Wednesday with an Overweight rating and $110 price target. “We are Overweight Amex based on our expectation of accelerated US card spend, driven by 1) ramping consumer spending and 2) higher merchant penetration through OptBlue,” Pate wrote in a note. The analyst adds that American Express is highly leveraged to an improving economy along with higher equity market valuations and higher housing prices due to its “more affluent” client base. Pate also notes that American Express' roll-out of OptBlue gives the company the opportunity to see its merchant penetration base increase through increased acceptance at small merchants. The analyst sees OptBlue providing a “meaningful value proposition” to small merchants that could result in American Express narrowing the merchant gap relative to its competitors. Finally, Pate states that the U.S. consumer is "poised for the best year thus far in the recovery" which bodes well for American Express as it will see increased activity among its cardholders and merchants.