AXP - American Express outpaces the market but the signals are a mixed bag
2023-12-29 11:06:42 ET
American Express Company (NYSE:AXP) gave a stellar performance this year. AXP’s total returns of more than 25.59% outpaced the S&P 500 at 25.08% and the Dow Jones at 13.80%. However, American Express underperformed the tech-heavy NASDAQ 100, which returned 55.57%. As the year closes, investors need to know what to expect from the company.
American Express is certainly a winning stock. That explains why Berkshire Hathaway Inc. (NYSE:BRK.A) holds a 20.8% stake in the company. The stake accounts for about 7.7% of Berkshire Hathaway’s portfolio. For investors considering the company at the valuation of $187, it is important to analyse the timing. American Express is a great pick for momentum trading.
Fundamental analysis shows that American Express is significantly overvalued. The forward PE of 16.69 and a PEG ratio of 1.16 support our analysis. After factoring in the expected EPS growth, the price could slide lower towards $162 fair value. However, the price remains slightly elevated ahead of the ex-dividend date of January 4, 2024. Earnings releases are also expected on January 26th.
American Express is trading in the overbought region
Technical analysis shows mixed signals. On the weekly chart, the RSI was recorded at 67. That shows the price heading towards the overbought region. On that account, the stock could still edge higher. However, the weekly chart is lagging behind the daily chart, which has already triggered the sell signal.
The daily chart shows American Express trading at an RSI of 75.34. The stock is certainly overbought. The only factor holding the price at the current levels is the ex-dividend date. After Jan 4th, the price can be expected to decline significantly. Investors with an interest in buying American Express could wait for the price to hit the target of $162.
Summary
American Express is a winning stock pick, considering the superior returns over the last year. However, the stock is trading above the target price of $162. We expect the price to edge lower after the ex-dividend date of January 4. Investing at the current valuation may not be a wise idea as the signals are mixed.
The post American Express outpaces the market, but the signals are a mixed bag appeared first on Invezz