Coronavirus Travel Worries Are Turning This American Express Analyst Bearish

While American Express Company AXP has exhibited resilience and executed well during the COVID-19 pandemic, there are concerns around the “near-to-medium term billing volumes, particularly airline and lodging spend,” according to BofA Securities.

The American Express Analyst: Mihir Bhatia downgraded American Express from Neutral to Underperform and reduced the price target from $106 to $95.

The American Express Takeaways: Airline and lodging spend is at merely 16% of 2019 billing volumes, and AmEx has high exposure to this segment, Bhatia said in the Wednesday downgrade note.

“BofA Sector Analysts estimate it could be 2024 before spending volumes on airlines and lodging are at 2019 levels, and a full recovery is dependent on a vaccine being available and widely administered,” the analyst said. 

Travel could remain as an overhang for the company’s billings growth in the near-to-medium term, and prolonged weakness in travel spend will likely dampen sentiment for the stock, he said. 

Bhatia lowered BofA's earnings estimates for AmEx for 2020 and 2021 from $3.67 to $3.59 per share and from $7.04 to $6.75, respectively, to reflect lower billings growth.

AXP Price Action: Shares of American Express were down 2.68% at $95.84 at last check Wednesday.