American Express Stock Downgraded by HSBC and BTIG

American Express Company (NYSE:AXP) stock received a downgrade from two investment banks, HSBC and BTIG, due to concerns over the stock's valuation and slowing fundamentals.

HSBC's Downgrade

HSBC cut its rating on AXP shares from Buy to Hold, citing the stock’s significant rally as a reason for the downgrade. The stock is up 47% year-to-date and 85% over the past twelve months, outperforming the S&P 500 gains of 21% and 33% during the same periods.

HSBC analysts recognize American Express's strong economic model, manageable credit risk, appealing to younger demographics, proven product innovation, and a strong brand. However, they believe the current stock price reflects these positive attributes entirely. Concerns regarding revenue growth were also noted, with a suggestion that achieving a 10% annual revenue growth target “may be challenging without accelerating economic growth.”

The valuation of the company is another area of concern; the stock is currently trading at 20.3x the consensus earnings estimate for the next twelve months, considerably higher than its 10-year average of approximately 15x. This valuation is slightly below the historically elevated price-to-earnings multiple of the S&P 500.

Analysts from HSBC stated, “We find it difficult to argue that AXP should trade at or above a market PE multiple given its substantial credit portfolio, status as a systemically important banking institution, and economic sensitivity.” Despite the downgrade, HSBC slightly raised the price target on American Express from $265 to $270.

BTIG's Downgrade

BTIG also downgraded AXP from Neutral to Sell, primarily due to two factors. Firstly, BTIG anticipates greater risks to American Express's core financial metrics, including billed business, revenue growth, net interest income, and credit trends. Secondly, they argue that the stock's price reflects overly optimistic expectations for 2025, including earnings per share and revenue growth, which they believe the company is unlikely to meet.

The BTIG team noted, “A significant improvement to Amex fundamentals is necessary just to sustain AXP's current share price.” Their price objective for the stock remains unchanged at $230.