By The stock of American Express (ticker: AXP) experienced a drop in value on Thursday, following a downgrade by a Wall Street firm. Baird’s David George and Brennan Crowley lowered their rating on the credit-card company to Neutral/high risk, after maintaining an Outperform rating for over a year. Although their price target of $185 remains unchanged, implying a marginal 6% gain based on Wednesday’s closing price, the cut in rating suggests lower expectations for the upcoming earnings report.
In regard to American Express’ net interest margin, George expects it to be at 7.84% for the quarter ending in June. However, analysts estimate that the company will post a higher figure of 8.3%, according to FactSet data. The lower rating is partly attributed to the net interest margin, which is the difference between interest income generated and the amount of interest paid by the company to lenders. Baird anticipates that American Express’ metric will be softer in the second quarter compared to broader estimates. This is primarily due to a shift in funding mix and rising deposit costs.
Despite these challenges, American Express continues to seek opportunities for growth and to navigate the evolving economic landscape. As the company prepares to release its earnings report, investors will be closely monitoring the results for further insights into its performance.
Rising Costs for Banks Reflect Federal Reserve’s Rate Hikes
The Federal Reserve’s recent rate hikes aimed at controlling inflation have had a direct impact on the costs associated with funding deposits. Currently, the overnight rate, which indicates the rate at which banks borrow from one another, stands at 5.07%. This marks a significant increase from the 1.6% recorded just a year ago.
Analysts Adjust Their Views on American Express Stock
Analysts have reevaluated their perspective on American Express (AXP) and its potential to drive top-line growth. Although they still acknowledge the strength of the AXP franchise, they no longer view the risk versus reward as attractive.
Second Quarter Results Awaited
The financial industry eagerly awaits American Express’s second-quarter results, which are set to be announced on July 21st. This disclosure will undoubtedly shed light on the company’s performance during this period.
American Express Stock Declines
On Thursday, shares of American Express faced a 2.4% decline, settling at a value of $170.82 per share. However, it’s worth noting that the stock has experienced an overall gain of 16% throughout this year.
Citi Analysts Adjust their Target Price
Citi analysts recently made modifications to their target price for American Express stock. They lowered it from $150 to $148. This decision came as a result of reviewing proprietary credit-card purchase data, which revealed that travel and entertainment spending had stabilized following a notable 39% surge in this sector during the first quarter.
CEO’s Optimistic Outlook on Travel and Entertainment Industry
CEO Stephen Joseph Squeri expressed his optimism about the future of the travel and entertainment industry at an industry conference held on June 1st. He believes that this particular sector will remain robust throughout the rest of the year.
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