"We believe that AXP's recent broader inclusion initiatives are likely to take some time to develop and that top-line growth is likely to be constrained in the near term," Jefferies said.
Further, analysts believe recent competitive pressures are likely to increase marketing as well as card member rewards expenses, as industry participants vie to gain share in a post-CARD Act marketplace.
Jefferies said they are encouraged by the longer-term prospects of recent initiatives from the company, like OptBlue and Serve, and believe they are in line with the company's history of continued innovation and expansion. However, they believe these strategies come at a short-term cost and are likely to weigh on results over the coming quarters.
The research firm's $95 price target equates to about 15x its FY16 EPS estimate. Jefferies noted that this is a discount to other network processors which they believe reflects American Express' relatively smaller scale and lower merchant acceptance, as well as credit risk exposure.
Risks include credit risk, regulatory risk, general economic sensitivity, a pending legal case with the DOJ, and reliance on capital markets for funding, analysts added.
Shares of American Express closed up 2.47% at 90.44 yesterday.
Separately, TheStreet Ratings team rates AMERICAN EXPRESS CO as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation: