American Express stock could rally 20% from here: Morgan Stanley

American Express Company (NYSE: AXP) ended 4.0% up on Friday after a Morgan Stanley analyst said it was a top pick in financial services.

American Express stock should be worth $188

Betsy Graseck agreed that the multinational is not seeing its revenue grow as strongly as it did just after the pandemic. Still, she’s convinced that the slowdown won’t be as bad as feared.

The analyst dubs now a suitable time to build a position in American Express stock since it’s trading at a deep discount.

Amex hasn’t traded this cheaply on P/E since 2019, with a 12x P/E pricing in a sharper slowdown in growth. Yes, discretionary spend is slowing, but this is already baked into consensus estimates.

She upgraded the fintech today to “overweight” and announced a $188 price target that suggests about a 20% upside from here.

American Express missed profit estimates in Q1

Last month, the New York-based company said its profit in the first financial quarter came in shy of Street estimates.

Graseck forecasts a compound annual growth rate (CAGR) of 13% for American Express over the next year two years versus just 7.0% that its current share price is implying. Her research note also reads:

From here, American Express offers highest revenue growth, strong operating leverage, and better credit quality.

American Express stock currently pays a dividend yield of 1.53% that makes up for an additional reason to have it in your investment portfolio.