WMT - Credit Concerns Spark Downgrades! American Express Capital One Synchrony Financial Hit By Credit Quality Doubts Analyst | Benzinga

BMO Capital Markets analyst James Fotheringham downgraded American Express Company (NYSE: AXP) to Underperform from Market Perform, with a price target of $157.

The analyst downgraded the company due to concerns regarding credit quality, loan loss reserve adequacy, decelerating spending growth, rising consumer engagement costs, and valuation.

Further, the $157 AXP target price implies -17% downside for shareholders, the analyst writes.

AXP's 3Q23 sequential credit trend is meaningfully higher than almost all other banks and specialty lenders, per the analyst.

Also Read: Why JPMorgan Is Bullish On American Express, Bearish On Rocket Companies

Further, the company's 3Q23 non-accrual loan balance remains relatively low (up only +6% sequentially), the analyst adds.

AXP's customer engagement expenses could outpace growth in billed business, significantly as consumer spending growth slows to <1% YoY in 1Q24. 

The analyst worries about the resulting pressure on AXP's overall operating leverage.

Fotheringham downgraded Capital One Financial Corporation (NYSE: COF) to Market Perform from Outperform, with a price target of $124, implying a 6% potential downside.

After COF shares ran up almost +50% into year-end, the stock got a downgrade due to concerns regarding credit quality, regulatory capital pressure, rewards competition, partnership business underperformance, and the potential impact of the CFPB's late fee proposal.

Also See: Full story available on Benzinga.com