NEW YORK (TheStreet) -- American Express(AXP) - Get Report has already had high-profile breakups with two lucrative customers this year: Costco(COST) - Get Report and JetBlue (JBLU) - Get Report. Now, pressure on the credit card company is increasing with the possibility that a third client, Fidelity(FNF) - Get Report, may also leave.
While the Fidelity deal is considerably smaller than the other two, analysts say it may indicate that New York-based American Express is losing market power to rival payment processors like Visa(V) - Get Report and Mastercard(MA) - Get Report and competing credit-card issuers such as Discover(DFS) - Get Report and Capital One (COF) - Get Report.
That would compound the challenge from a federal court ruling, which American Express is appealing, that lets merchants steer customers to competing credit cards that charge lower fees to stores.
"More significant than Fidelity and playing guesswork around how much revenue is lost there is the competitive challenges in the high-end card space," Jason Arnold, an analyst with RBC(RBC) - Get Report , said in an interview. "Their contracts are for a fixed period of time, and when a competitor is offering a co-brand card to Costco , that's more compelling to Costco members, they are going to go elsewhere."
To be sure, Fidelity, whose potential exit was first reported by Bloomberg, isn't one of the company's larger co-brand relationships, a spokesperson said: It represents only a small fraction of American Express's Global Network Services business. And there have been positive developments: The company recently added Charles Schwab(SCHW) - Get Report as a co-brand partner, and it has renewed deals with Delta(DAL) - Get Report , British Airways, Starwood (HOT) , and Cathay Pacific (CPCAY) .
"We're constantly looking to provide value to our customers and shareholders, and one of the ways is through our partnerships," an American Express spokesperson said. "The overall strategy is to renew partnerships that provide value to our shareholders and our customers."
This year hasn't been good for shareholders so far. American Express stock has fallen 18%, compared with drops of 17% at Discover and and 6% at Capital One. Visa and Mastercard, meanwhile, have gained 10% and 9%, respectively.
Losing Fidelity would be "symptomatic of the continued deterioration of the franchise value at AmEx," Jim Shanahan, an analyst with Edward Jones, said in a phone interview.
"We are nervous about a series of negative drum beats," he added. "They have been investing in marketing and membership rewards and those sorts of investments, while Visa and Mastercard have made investments in technology. From a tech perspective, they are behind, frankly."
AmEx's revenue fell by 4% to $7.8 billion in the second quarter, and profit may be curbed later this year as the company invests more in advertising, rewards and discounts, analysts say.
"Management comments suggest higher expenses in the remainder of 2015 as the company ramps up marketing initiatives in response to the termination of the U.S. Costco relationship in early 2016," RBC said in a recent report. "Given the past few years of expense cuts, we remain concerned that eventual belt-tightening will prove challenging without cutting off circulation."
The company's appeal of the ruling in a Justice Department lawsuit that permits so-called steering, meanwhile, is pending.
"The concern is that retailers will steer consumers away from AmEx, or they may need to cut" their fees, Arnold said. Currently AmEx receives about $2.50 for every $100 spent at a partner retailer, while competitors such as Discover, Visa, and Mastercard receive an average of about $1.90 per $100, Arnold explained. RBC maintains a sell rating on American Express and a $69 price target. The shares were trading at $76.70 on Monday.
Not all analysts are as pessimistic. The stock's performance so far this year may be an opportunity for investors to get a discounted price on a company with strong fundamentals, said Sameer Gokhale, an analyst with Janney Montgomery Scott.
"I like the AmEx story, given how beaten up it's been," he said. Not only is the Fidelity deal relatively small, American Express was providing only the payment-processing services. Bank of America(BAC) - Get Report , which issued the cards, was probably reaping most of the profits, Sanjay Sakhrani, an analyst with Keefe Bruyette & Woods, said in an interview.
"It's likely the loss will be minimal," Sakhrani said.
The recent deal with Charles Schwab is more significant in terms of "moving the needle" for AmEx, because the company will process payments as well as issue the cards, which means it will draw revenue from fees as well as interest, Sakhrani said.