AMEX is crashing, down over 9%, following lower revenues and weak guidance...
Analysts are jumping ship...
RBC Capital Markets’ Jason Arnold cut the stock to Underperform and sliced $10 off his target, to $59, citing the company’s guidance:
We remain concerned that Amex continues to face multiple fronts of fundamental challenges in its business: 1) competitive challenges to replace lost business, potential to lose Starwood cobrand/other business; 2) pressure on discount fee revenue from competition/business mix/ DOJ and regulation; 3) expense management is likley to prove difficult withoutcutting into bone, in our view.
Keefe, Bruyette & Wood’s Sanjay Sakhrani cut the shares to Market Perform:
It’s without question that AXP has strong assets and an unparalleled brand that can capitalize on the convergence of payments and commerce. This is why we have been a proponent of the company and its shares. Clearly, more recently this has been the wrong call. Despite the bar being pretty low at this point from a valuation standpoint, we think it’s best for us to downgrade the shares to MP from OP. While there is certainly value at current levels (particularly for long-term investors) and downside risk seems to be somewhat limited, all else equal, we think the road ahead could be bumpy for the foreseeable future. The main reason behind our thesis is that it is difficult for us to be constructive given the extended timeline for a return to the company’s 12-15% EPS growth targets and the need for evidence of traction and execution on the substantial investments being made. This is particularly the case in light of management’s commentary that revenue growth had not accelerated according to plan in the back half of 2015, despite heightened investment initiatives. Ultimately, in the current volatile macro environment we believe there is better relative value elsewhere in our coverage universe where growth is a more prevalent part of the story today.
Stifel’s Christopher Brendler, reiterated a Hold rating on the stock:
In our view, AXP’s disappointing 2016-2017 EPS guidance confirms our long-standing concerns about its ability to compete in today’s intensely competitive card market. While we applaud the decision to finally shutdown Enterprise Growth and refocus on cost cutting, we are disappointed with the inability to re-inspire confidence in the top-line turnaround in such a tough environment. Although several of these headwinds are unfortunate timing, we struggle to find a easy answers and instead see AXP facing years of below average growth. Combined with the macro sell-off and rock-bottom valuations at its closest card-issuing peers, we continue to await better visibility.