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