I’m looking for stocks that might be ready for an additional beating down next week when the market opens. American Express looks like one that could get hammered along with the rest of the financial sector. And if it does get hammered, the Credit Suisse 12 month target of $40 looks like a nice entry point for this stock.
At the close of the market Friday, AXP:NYSE was $48.51. That same day Credit Suisse updated their report with a 12 month target of $40, an 18% reduction in price. Could it happen? Yes.
Does Credit Suisse know something that The Street and S&P don’t know? They both rate AXP with high rankings, The Street with a B+ buy and S&P with 5 Stars (highest rating):
Here is what Credit Suisse has to say about AXP:We continue to believe that American Express will experience pressure on its merchant discount rate as it is the highest among the four major card networks. We believe that the risk of pressure on the discount rate is increasingly likely over the next 12-18 months.Credit Suisse has a 12 month target price of $40 for AXP.
With all the volatility in the market, it might be possible that Credit Suisse is right about AXP. At $40 AXP could be a stock worth holding. AXP has revenue growth, notable return on equity, good cash flow from operations, solid stock price performance and impressive record of earnings per share growth plus AXP would be yielding around 2%.
American Express will feel pressure from merchants because merchants are feeling pressure to accept the American Express Card. So the merchant wants to accept the card, but does not wan tot pay the higher transaction fees. Amex also has historically charged a higher merchant discount than Visa or MasterCard. The size of the premium can differ significantly: in the US, Amex charges 66 basis points more (2.56% vs 1.9%) than rivals Visa and MasterCard. Source
Personally, I always choose to use my AMEX Skymiles Credit Card. Love those Skymiles. Most of my friends also prefer the AMEX card.
Will it ever hit $40? I don’t know and neither does anyone else, (except Credit Suisse, wink) If the market continues on a downturn, it is possible. And if it does, I’ll be adding to financial sector stocks I already own: GS and BRK.B.
I agree with this comment from The Street:
Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company’s strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year
Other current research on AXP:
American Express Is A Buy for Growth and Value
Given that Berkshire Hathaway is AmEx’s largest shareholder (owning 12.7% of shares outstanding, as of June 30) we think AmEx is a sound investment.
AmEx, JPMorgan, Wells Fargo: The Select Few U.S. Financials With Buy Ratings
Sept 1, AXP reports better than expected 2nd QTR results, Analysts are revising their earnings forecasts upwards