Over the past year, the shareholders of American Express Co. (NYSE: AXP) have seen the share price decline a whopping 12%, compared with an 8% increase for the Dow Jones Industrial as a whole, making it the worst performer on the index. This also compares to positive gains of 29% and 21% for its closest rivals, Visa Inc. (NYSE: V) and MasterCard Inc. (NYSE: MA), respectively. Here are some possible reasons why.

Highly Commoditized Business

American Express competes in a highly commoditized payment processing and credit card business. This means that merchants, businesses that use companies such as American Express, want their payments processed at the lowest possible price. For instance, American Express charged Costco Wholesale Corp. (NASDAQ: COST) 0.6% for payment processing, while its rivals decided to charge Costco next to nothing in order to gain customers, according to Bloomberg. Even Charlie Munger, Berkshire Hathaway’s (NYSE: BRK-A) (NYSE: BRK-B) vice chairman, questioned American Express’s competitive advantage in the Daily Journal’s annual meeting.

Analyst Downgrades

American Express’s loss of a high-profile client did not bode well with Wall Street analysts. Oppenheimer downgraded the stock on April 7 to Underperform from Perform. On April 27, Nomura downgraded the stock from Buy to Neutral. Panicked casual stock market observers sold on these predictions, sending share prices downward. By contrast, Visa and MasterCard have fared better on Wall Street perceptions. On May 20, Visa and MasterCard each received an initiation in coverage by Credit Agricole with an Outperform rating.

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Insider Selling

Another item that may have investors running scared is the huge amount of insider selling going on at American Express since it departed ways with Costco in February. Insiders have sold close to 865,000 shares since March, not including option exercises. The largest chunk, 769,000 shares, was sold by American Express CEO Kenneth Chenault on May 18. Of course, MasterCard has also seen large amounts of insider selling over the past couple of months, which could simply give indication of insiders taking profits during a bullish market cycle.

Short Selling

American Express’s short interest is up 2.6% from the same time last year, representing another drag on its stock price. Also, the slight uptick may have investors nervous about further potential declines in stock price.

Negative Outlook

In the most recent quarter, American Express said that its fiscal year 2015 will be a “flat to modestly down year-over-year” as the company invests in ways to fill in the gap left by the Costco exit. Investors, seeing the nasty combination of potentially lower revenue combined with possibly higher expenses, are less likely to buy up American Express shares.

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It looks like Wall Street agrees with American Express’s dim outlook. Analysts have a target price of $86.04 per share, representing a 7.8% increase. Things look slightly better for MasterCard and Visa. Analysts have target prices of $100.19 and $74.40 for MasterCard and Visa, respectively, representing roughly 8.2% and 8.1% gains, respectively.

By William Bias

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