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American Express Upgraded as BofA Sees Balanced Risk-Reward

American Express shares rose Thursday after Bank of America upgraded the credit-card giant, citing a more attractive valuation.
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American Express  (AXP) - Get American Express Company Report shares rose Thursday, after Bank of America upgraded the credit-card company to neutral from underperform in light of a more attractive valuation.

Analyst Mihir Bhatia lifted his price target to $169 from $150.

American Express stock recently traded at $162.38, up 0.6%. It has gained 11% over the past six months amid strong consumer spending. It has slid 3% in the past month.

“Following recent underperformance in AXP shares, we … view [the] risk-reward as balanced with few negative catalysts on the horizon,” Bhatia wrote in a commentary.

“AXP shares have underperformed the S&P 500 by about [6.9 percentage points] since Aug. 1, as investors feared the Covid-19 delta-wave would slow the economic recovery and impact AXP's billing levels.

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“However, at a conference appearance this week, AXP noted that quarter-to-date billings are up 3% vs. 2019 levels (an acceleration from down 2% in the second quarter). This was better than feared.”

Further, “with the delta wave showing signs that it may have peaked, we see fewer negative catalysts in the near term,” Bhatia said.

“At the same time, AXP's core super-premium consumer and small business card businesses are gaining momentum (e.g., Platinum card member acquisitions are exceeding pre-refresh levels).

“AXP will also benefit from improvements in travel spending, particularly by large businesses, which we think will occur in 2022,” the analyst wrote.

To be sure “a slower economic recovery, the potential increase in corporate tax rates, and the potential for higher-than-expected card member engagement spending remain near-term risks that prevent us from taking a more bullish view,” he said.