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Companies like Ally Financial, Visa, Discover, PayPal Holdings, and others in the consumer financial services sector have had a good year.
Capital One Financial Services, Inc.
Near-all-time highs are being traded. Despite the company’s sky-high values, experts at
Goldman Sachs is a financial services firm.
Continue to expect upside in American Express, upgrading the stock to Buy from Neutral with a $225 price target, implying a 36 percent gain.
When
American Express is a credit card company based in
(ticker: AXP) issued full-year guidance for 2021, stating that the business aimed to meet its original profits targets set for 2020 by 2022. Originally, management expected earnings of $8.85 to $9.25 per share, but Goldman analyst Ryan Nash predicts that the company’s earnings will climb to roughly $10.00 per share in 2022, thanks to a recovery in travel-related spending and a favorable credit climate. Covid-19-related travel bans and lockdowns wreaked havoc on credit card issuers. T&E has typically accounted for around 25% of the volume on American Express’s network, with the total split fairly evenly between consumer and commercial T&E spending. In the second quarter of 2020, American Express witnessed travel-related expenditures decline to as low as 13% of 2019 levels due to the pandemic.
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T&E has recovered to around 40% of 2019 levels since the trough in the first quarter of 2021. According to data provided by Goldman analysts, non-T&E spending, which accounts for the majority of spending on American Express’s network, increased to 112 percent of 2019 levels. Commercial T&E spending is expected to continue below pre-Covid levels, with the potential to reach 85 percent of those levels by the end of 2023, according to Nash. He does predict, however, that consumer T&E spending, which has recovered to 68 percent of 2019 levels in the first quarter of 2021, would return to 100% of 2019 levels by the end of 2021. Nash also points out that the increase in consumer spending has been matched by a decrease in credit-card default rates. Delinquency rates have decreased from 2.7 percent in the first quarter of 2020 to 1.89 percent in the first quarter of 2021, according to statistics from the St. Louis Federal Reserve. While Nash anticipates delinquencies to stay low in 2019, he warns that faster-than-expected credit deterioration could put his price goal at danger. The absolute price/earnings ratio of American Express has increased, bringing it closer to long-term averages, but the company still trades at a discount to the market.
S&P 500 index.
Nash points out that the company’s P/E hasn’t recovered since it lost the contract.
Wholesale Costco
portfolio to (COST)
Citigroup
(C) in the year 2016. In recent trade, American Express shares is up 0.6 percent to $169.46. The S&P 500 is down 0.4 percent, and the Financials Sector Index of the S&P 500 is down 1.6 percent. To contact the editors at Barron’s, send an email to editors@barrons.com./n
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