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Morgan Stanley Downgrades American Express; Cites Anticipated Investors' Spending Tactics

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Morgan Stanley Downgrades American Express; Cites Anticipated Investors' Spending Tactics
  • American Express Company (NYSE: AXP) shares have declined 34.57 percent over the past one year, down to $55.06 on January 22.
  • Morgan Stanley’s Cheryl M. Pate has downgraded the rating on the company from Overweight to Equal-Weight, while lowering the price target to $64.
  • With expectations of a slower top line and increased investment spend likely to push double digit EPS growth out to at least 2018, Pate prefers to move to the sidelines.

Analyst Cheryl Pate explained, “We move to the sidelines on AXP on a longer trajectory and a higher degree of uncertainty around future growth.”

Pate now expects top-line growth above the mid-single digits to be difficult for the company to achieve in the medium term, against the evolving payments landscape.

Related Link: Jefferies Prefers Mastercard Over Visa Heading Into Q4 Results

With steeper discount rate declines expected, it will become even more critical for American Express’ billed business to gain market share, according to the Morgan Stanley report.

Pate believes that “sustainable high-single-digit revenue growth, likely a function of higher domestic acceptance and stronger international penetration, will be the key to valuation moving back toward a market multiple over the longer term.”

Expense management is also expected to play a more important role in EPS growth going forward, with the company having announced a $1 billion cost reduction initiative. Pate believes that “investors as less likely to pay up for cost rationalization than revenue growth.”

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Latest Ratings for AXP

DateFirmActionFromTo
Oct 2019MaintainsOverweight
Oct 2019MaintainsMarket Perform
Jul 2019MaintainsNeutral

View More Analyst Ratings for AXP
View the Latest Analyst Ratings

Posted-In: Cheryl M. Pate Morgan StanleyAnalyst Color Long Ideas Downgrades Price Target Analyst Ratings Trading Ideas

 

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