American Express shares remain in a bull market ahead of the FED meeting

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Jun 15, 2021
  • Credit Suisse assigned an underperforming rating this month on American Express
  • American Express first-quarter results were in line with the recovery in economic activity
  • FED will announce its decision on monetary policy this Wednesday

American Express Company (NYSE: AXP) shares have advanced from $121.30 above $167 since the beginning of January 2021, and the current price stands around $166. American Express’s first-quarter results were in line with the recovery in economic activity, and at the current stock price, this company is reasonably valued.

Fundamental analysis: American Express’s outlook remains stable

American Express is an American multinational financial services corporation that operates in credit card and traveler’s cheque businesses. American Express has a very good position in the market, but Credit Suisse assigned an underperforming rating this month on American Express as it identifies near-term earnings risk.

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American Express’s business will be affected by the COVID-19 pandemic certainly next several quarters, and the company announced that the card fee growth would not return to double digits until 2022. American Express reported first-quarter results in April; total revenue has decreased by -12.1% Y/Y to $9.06 billion while GAAP EPS for the same period was $2.74 (beats by $1.13).

The card member loans declined 10% year over year, and the company continues to have risks due to the current low-interest rates. Even though the U.S. economy continues to recover from the pandemic, the FED is widely anticipated to maintain its ultra-loose monetary policy unchanged, which will continue to pressure the margins of American Express.

The pandemic also hurt American Express’s earnings in the last several quarters, but the company’s management expects a 2021 EPS of ~$6.00-$7.50. The recovery in the travel and entertainment section still represents a risk, and if this segment does not rebound nicely from the pandemic, it will put pressure on the company’s balance sheet.

The current dividend yield stands around 1.05%, and it is important to mention that the board of directors declared a $0.43/quarterly share dividend last month (in line with the previous). American Express’s first-quarter results were in line with the recovery in economic activity, and the company will probably have revenue growth and margin expansion in the upcoming quarters.

“We believe that by the end of the year in the U.S. we will have a full consumer recovery from a travel perspective, and overall by the end of the year I think globally we’ll probably be about 80% of what we were in 2019,” American Express CEO Steve Squeri told CNBC on Monday.

American Express’s outlook remains stable, and with the market capitalization of $132 billion, shares of this company are reasonably valued.

Technical analysis: American Express shares remain in a bull market

Data source: tradingview.com

The critical support levels are $150 and $140; $170 and $180 represent the current resistance levels. If the price jumps above $170 resistance, it would be a signal to trade American Express shares, and the next target could be around $175 or even $180.

On the other side, if the price falls below $150, it would be a firm “sell” signal, and the next target could be around $140.

Summary

American Express shares remain in a bull market, and if the price jumps above $170 resistance, the next target could be around $175 or even $180. American Express’s first-quarter results were in line with the recovery in economic activity, and the company will probably have revenue growth and margin expansion in the upcoming quarters.

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