Dow component American Express Co. (AXP) reported mixed Q2 2020 results last week, with $0.29 per-share (EPS) beating profit estimates, while revenue of $7.67 billion fell well short of $8.25 billion expectations. Revenue contracted a staggering 29.2% year-over-year, undermined by the ongoing impact of the COVID-19 pandemic. The release triggered a modest sell-the-news reaction, dropping the stock 1.4% to a 2-week low.
American Express Heavily Exposed To Business Travel
The travel services giant has been pummeled by the pandemic, losing significant income since corporations worldwide stopped business travel in the first quarter and sent employees home to work through virtual meeting spaces. Many industry experts now believe that many of Amex’s blue chip customers will remain sidelined well after the infection runs its course, addicted to the lower costs of conducting business digitally, rather than in person.
Executives summed up the tough quarter, noting “while our second quarter results reflect the challenges of the current environment, we remain confident that our strategy for navigating this period of uncertainty is the right one. Our customers continue to be engaged with our products and services; we have a productive and dedicated workforce; our capital and liquidity levels remain strong; and we continue to focus on those areas most critical to our long-term growth.”
Wall Street And Technical Outlook
Wall Street consensus has grown increasing cautious on American Express in the last two months, unlike Mastercard Inc. (MA) and Visa Inc. (V), who have continued to book significant income through high volumes of digital transactions. It’s currently rated as a ‘Hold’, based upon 6 ‘Buy’ and 9 ‘Hold’ recommendations. Three analysts are now telling shareholders it makes sense to sell positions and move to the sidelines. Price targets range from a low of $85 to a street high $119 while the stock is trading about $6 below the median $101 target.
Technically-speaking, there’s little to love about American Express, which looks like a better short sale opportunity than long-term investment through the second half of 2020. It posted an all-time high in January, fell more than 50% into March, and reversed at the 200-day moving average in June, settling in the lower half of the 6-month range. Ominously, accumulation readings have dropped to depressed March levels, predicting that price may soon follow.