Citi’s Donald Fandetti mentioned that the sentiment on American Express Company AXP “is notably less negative than it was earlier in the year, as investors seem to view the valuation as skewed to the upside yet still lacking positive catalysts.”
Fandetti reiterated a Buy rating on the company, with a price target of $70.
Cautious Tone
The analyst stated that during the recent investor meeting hosted by Citi, Chairman and CEO Ken Chanault and CFO Jeff Campbell “struck a cautious tone on global spend though seemed confident in their ability to compete in the heated rewards environment and view credit trends as remaining very stable.”
Management also reaffirmed that a large part of the recent new account growth would start to contribute more meaningfully to the revenues in 2H.
The $12 billion Costco Wholesale Corporation COST portfolio sale is expected to close by the end of June.
“Much of AXP’s Q1 US account growth was current Costco cardholders receiving a new Amex card, which should have a more visible benefit to spend/revs going forward,” Fandetti pointed out.
Driving Loan Growth
American Express is focused on driving card loan growth, having reported 12 percent year on year growth in the 8-K filing on May 17.
Although the card industry has been experiencing accelerating loan growth, Fandetti stated that American Express’ rate was “impressive given their prime/affluent target market.”
Regarding credit, “the company does not believe investors should view the recent weakness at non-bank tech platforms as an early sign of US consumer deterioration,” Fandetti added.
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