Citi Sees American Express As 'Lacking Positive Catalysts' But 'Notably Less Negative' Than Earlier This Year

Citi’s Donald Fandetti mentioned that the sentiment on American Express Company (NYSE: AXP) “is notably less negative than it was earlier in the year, as investors seem to view the valuation as skewed to the upside yet still lacking positive catalysts.”

Fandetti reiterated a Buy rating on the company, with a price target of $70.

Cautious Tone

The analyst stated that during the recent investor meeting hosted by Citi, Chairman and CEO Ken Chanault and CFO Jeff Campbell “struck a cautious tone on global spend though seemed confident in their ability to compete in the heated rewards environment and view credit trends as remaining very stable.”

Management also reaffirmed that a large part of the recent new account growth would start to contribute more meaningfully to the revenues in 2H.

The $12 billion Costco Wholesale Corporation (NASDAQ: COST) portfolio sale is expected to close by the end of June.

Related Link: The Landscape Is Changing For Credit Card Companies: How To Invest In It

“Much of AXP’s Q1 US account growth was current Costco cardholders receiving a new Amex card, which should have a more visible benefit to spend/revs going forward,” Fandetti pointed out.

Driving Loan Growth

American Express is focused on driving card loan growth, having reported 12-percent year-on-year growth in the 8-K filing on May 17.

Although the card industry has been experiencing accelerating loan growth, Fandetti stated that American Express’ rate was “impressive given their prime/affluent target market.”

Regarding credit, “the company does not believe investors should view the recent weakness at non-bank tech platforms as an early sign of US consumer deterioration,” Fandetti added.