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American Express starts at 'Neutral' by BTIG amid consumer concerns

EditorEmilio Ghigini
Published 2024-06-07, 05:20 a/m
© Reuters.

On Friday, BTIG initiated coverage on American Express (NYSE:AXP) stock with a Neutral rating. The firm expressed concerns about the potential for a downturn in consumer spending, particularly among super-prime consumers who have shown strength in recent years.

The analysis suggested that while significant credit loss acceleration is not anticipated, there might be challenges for super-prime consumers to maintain their spending levels.

The report highlighted worries regarding American Express's focus on attracting new account growth, particularly among Millennials and Gen-Z consumers.

These demographics are perceived to be more vulnerable to macroeconomic pressures, which could affect the company's card fee income. Additionally, the report noted a more dramatic deceleration in commercial spending, with no immediate improvements expected.

Despite these concerns, American Express was recognized for its success in continuing to grow new accounts in both the Consumer and Commercial sectors. This growth is seen as a counterbalance to the deceleration of spending among existing customers.

BTIG's stance on American Express reflects caution due to the potential impact of economic pressures on consumer behavior.

The firm's neutral outlook suggests that while there are positive aspects to American Express's business strategy, there are also significant risks that could affect the company's performance in the current economic climate.

In other recent news, American Express has been navigating a complex financial landscape, with recent developments pointing to both potential growth and emerging risks.

Analysts have noted stable delinquency rates as a positive indicator of the company's credit risk management. However, concerns have been raised regarding the acceleration of Net Charge-Offs and the potential for future financial risks.

American Express's strategic initiatives, such as focusing on premium cards and partnerships like the one with Delta, have driven revenue growth.

However, the recent slowdown in revenue growth has raised questions about the sustainability of such high growth rates. The company's decision to refresh a significant portion of its card products in 2024 signals its commitment to innovation and customer retention.

In other developments, American Express has received authorization from Russian President Vladimir Putin to voluntarily shut down its operations in Russia. This move follows the company's suspension of its operations in Russia in 2022 in response to Russia's military actions in Ukraine.

Meanwhile, Keefe, Bruyette & Woods have maintained their Outperform rating on American Express, indicating potential upside for the company's stock.

The Consumer Financial Protection Bureau has also released a report detailing consumer challenges with credit card rewards programs, a factor that could impact American Express given its focus on premium cards.

Finally, Warren Buffett has assured Berkshire Hathaway (NYSE:BRKa) shareholders that its major stock holdings, including American Express, will remain central to the company's portfolio under the leadership of his successor, Greg Abel.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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