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Baird analysts slashed their rating on American Express to Underperform from Neutral.
Photograph by Andrew Harrer/Bloomberg
American Express
shares posted solid gains last year, but one Wall Street team thinks the good times are over for the credit-card stock—and now is the time to sell.
Baird analysts downgraded American Express to Underperform from Neutral on Monday. The team, led by David George, also listed a price target: $190 a share.
In the same report, titled “Curb Your Enthusiasm,” the analysts cut their ratings on
Capital One Financial
and
Wells Fargo
to Neutral from Outperform. They trimmed their Capital One price target to $145 from $150 and listed a price target for Wells Fargo of $55.
Amex was down 0.9% to $187.44, while Wells Fargo fell 1.1% to $49.35. Capital One was up 0.3% to $132.80. Over the past 12 months, the stocks have gained 25%, 16%, and 36%, respectively.
The stocks have performed better than the overall market because of primarily three factors, Baird said: addressing funding concerns that proved “largely non-existent,” snapping up loan growth, and riding on the confidence that traders had in a soft landing for the economy.
Still, the analysts noted that Amex stock has reached a ceiling and investors should collect those gains.
“While
AXP
isn’t especially expensive, we see relatively little upside from here, and believe it should be sold as a source of funds here,” the team wrote. “We expect unemployment and subsequent card losses to mean revert over coming quarters and expect top line growth to moderate as the benefit of the inflation tailwind to subside.“
The team is stepping to the sidelines on both Capital One and Wells Fargo, pointing out that each stock’s risk/reward has become more balanced.
The trio of downgrades arrives ahead of what Baird analysts expect to be “an uneventful bank earnings season,” with
JPMorgan Chase,
Citigroup,
Bank of America,
and
Wells Fargo
reporting on Friday.
The team thinks several companies will offer a general earnings outlook for 2024 that suggests “continued modest declines in net interest income, flattish fees, and stable credit quality trends.”
“While we don’t expect any meaningful negative catalysts over the next couple of weeks, we also don’t expect a meaningful positive catalyst coming from this earnings season, which we think could present a better buying opportunity in several names,” the analysts wrote, adding that regional banks may have more to offer than mega-cap or credit-card stocks.
Write to Emily Dattilo at [email protected]
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