American Express (AXP) - Get Report, boosted by an economic rebound, is in a position to rebound to be "a top-line leader," according to a J.P. Morgan analyst who double upgraded shares of the credit card giant to overweight from underweight.
Shares of the New York-based company were up 2.22% to $124.86.
Analyst Richard Shane, who raised his December price target on the shares to $148 price target from $105, said in a note to investors that he was becoming increasingly optimistic on the credit card sectors due to improving forecasts for unemployment and GDP.
"This outlook portends higher interest rates, better credit performance, and a significant rebound from 2020 earnings with momentum in 2022," Shane said. "This translates to an improved outlook for credit-sensitive names and a dampened outlook for mortgage originators."
American Express will lap severe spending decline in March and April, the analyst said, and this will position the company to rebound "from being a top-line laggard to top-line leader" in the second half of 2021.
High-end spending will likely rebound sharply and early as the economy recovers, Shane said, and pent-up demand for leisure travel has the potential to be an "unprecedented catalyst" in the second half of the year.
"Earnings growth, earnings upside, potential for reserve releases and buy-backs screen among best in our coverage," the analyst said.
Shane said some of the downside risks for the company include weaker than expected spend growth, increased competition from third-party issuers and reduced travel-related revenue in the near term due to geopolitical turmoil and health concerns.
American Express reported weaker-than-expected third-quarter earnings in October, but cited a steady recovery in current spending volumes as businesses reopened from pandemic lockdowns.
The company is scheduled to report fourth-quarter earnings on Jan. 26.