Note that 24/7 Wall St. has American Express listed as one of nine great companies that can raise their dividends for the next decade.
One key analyst firm, Nomura, after meeting with the executive team at American Express, believes that negative investor sentiment could be on the verge of shifting.
Despite concerns that the company’s discount rate would decline meaningfully in light of heightened competition and loss of the U.S. Department of Justice steering case, analysts expect pressure to remain modest at two to three basis points annually.
American Express’s ability to maintain premium economics will give it a competitive advantage and positions it to gain share in Europe.
The sale of the company’s $14 billion of Costco loans, which are 100% risk-weighted, would boost the Common Equity Tier 1 ratio to 14.5% from 12.9% currently, positioning the company for yet another strong Comprehensive Capital Analysis and Review (CCAR) performance in 2016 (approval for more than 100% payout).
Unlike Discover and Capital One, which have faced violent market reactions to growth-driven reserve building, American Express is unlikely to face similar headwinds due to its spend-centric model.
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A few analysts weighed in on American Express ahead of its earnings:
- S&P Equity Research reiterated a Hold rating with an $80 price target.
- Barclays reiterated an Equal Weight rating and raised the price target to $85 from $77.50.
- Credit Suisse has an Underperform rating and lowered its price target to $74 from $76.
- Deutsche Bank reiterated a Buy rating.
- Oppenheimer reiterate an Underperform rating with a $68 price target.
So far in 2015, American Express has vastly underperformed the broad markets, with the stock down 16%. However over the past 52 weeks, the stock is only down 7%.
Shares of American Express were trading at $77.04 Wednesday, with a consensus analyst price target of $83.40 and a 52-week trading range of $71.71 to $94.89.
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