Dow component American Express Co. (AXP) is trading marginally higher in Thursday’s pre-market after Bank of America Securities upgraded the stock from ‘Underperform’ to ‘Neutral’, posting a $169 price target. The ratings change matches recent actions by Seaport Global Securities and Credit Suisse Group, highlighting analyst caution after the financial technology provider gained nearly 270% off the March 2020 low.
Delta Variant Stalls Business Travel Plans
The stock is highly levered to business and travel spending that’s been impacted by the COVID-19 pandemic. The growth outlook looked bright at the end of the first quarter but the Delta variant has forced corporations to delay plans to reinstitute airline travel, having a negative impact on airline, hotel, conference, and food transactions. That headwind has also impacted rivals Visa Inc. (V) and Mastercard Inc. (MA), with the trio pulling back from summer peaks.
American Express released solid August card metrics on Wednesday, reporting a U.S. Consumer Card Member net loan write-off rate of 0.6% vs. 0.7% in the prior month, or a -10 bps change. Consumer loans 30 days or more past due stood at 0.6% vs 0.6% in the prior month, marking no change, while the U.S. Small Business Card member loan net write-off rate of 0.5% matched 0.5% in July. Loans that were 30 days or more past due rose slightly to 0.5%, compared to 0.4%.
Wall Street and Technical Outlook
Wall Street consensus now stands at an ‘Overweight’ rating based upon 12 ‘Buy’, 1 ‘Overweight’, 13 ‘Hold’, 2 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $140 to a Street-high $227 while the stock is set to open Thursday’s session about $23 below the median $185 target. This low placement should favor a strong fourth quarter bounce but technical factors are telling a more bearish tale.
American Express topped out at 138 in January 2020 and sold off to a four-year low during the pandemic decline. The subsequent uptick reached the prior peak in February 2021, triggering an immediate breakout that posted an all-time high at 179.67 in July. A steady downtick since that time has flipped weekly and monthly Stochastics into sell cycles, predicting continued weakness that could reach 200-day moving average support near 150 in coming weeks.
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Disclosure: the author held Visa in a family account at the time of publication.