Keefe Bruyette maintains Outperform on American Express stock

  • Investing.com
Keefe Bruyette maintains Outperform on American Express stock
Credit: © Reuters.

On Monday, Keefe, Bruyette & Woods maintained their Outperform rating on American Express (NYSE: AXP ) with a steady price target of $265.00. The firm's stance comes in the wake of a notable rise in card issuer stocks, which, driven by a positive Consumer Price Index (CPI) number, have seen significant gains this past week, with many nearing their 52-week high levels.

The analyst at Keefe, Bruyette & Woods addressed investor concerns about whether the recent rally in card issuer stocks, including American Express, Capital One, and Discover Financial Services (NYSE: DFS ), might be reaching a peak as they trade at or above their normal price-to-earnings (PE) multiples based on 2024 earnings per share estimates.

Despite these reservations and the year-to-date increase, the firm believes there is still considerable upside potential for these stocks.

The positive outlook from Keefe, Bruyette & Woods is rooted in the broader economic recovery and improved credit trends. According to the firm, the economy is currently in a much better position than at the beginning of the year. This improvement is a key factor supporting the potential growth of companies like American Express.

The analyst highlighted the 'great bend' in credit trends, referring to an upcoming inflection point in charge-offs, which are expected to decline. This anticipated shift in credit trends is seen as a constructive sign for the future performance of credit card issuers.

InvestingPro Insights

As American Express (NYSE:AXP) continues to ride the wave of the broader economic recovery, keen investors are closely monitoring the company's financial performance and market position. According to InvestingPro data, American Express boasts a robust market capitalization of 174.49 billion USD, underscoring its significance in the consumer finance industry. With a P/E ratio of 19.94 and an even more attractive adjusted P/E ratio of 19.32 for the last twelve months as of Q1 2024, the company is trading at a low P/E ratio relative to near-term earnings growth, as highlighted by one of the InvestingPro Tips. This could signal a potential value opportunity for investors.

Furthermore, American Express's revenue growth of 9.33% over the last twelve months and a quarterly growth of 9.95% in Q1 2024 indicates a strong and consistent top-line performance. With gross profit margins standing at 55.73%, the company demonstrates its ability to maintain profitability. Another InvestingPro Tip points out that American Express is not just a prominent player in the Consumer Finance industry; it has also maintained dividend payments for 54 consecutive years, which may be particularly appealing for income-focused investors.

To gain deeper insights and uncover additional InvestingPro Tips, such as American Express's high return over the last year and its liquidity position, investors can explore further by visiting https://www.investing.com/pro/AXP. For those looking to delve into a comprehensive analysis, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the 12 additional tips listed on InvestingPro that could help in making informed investment decisions.

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