American Express Co. (AXP) has traveled a rocky path in 2020, with some growth spurts over the past six months. The stock has trailed the S&P 500, falling by about 15.7% compared to the S&P 500’s gain of about 7.8%. Despite American Express’s 2020 struggles, the leading provider of credit cards and card network services was added to the WhaleWisdom’s WhaleIndex on August 17, 2020.
American Express has been negatively impacted by the coronavirus pandemic and related economic slowdown and many other businesses. Pandemic related quarantines, business closures, travel restrictions, and an overall reduction in consumer spending means fewer fees collected from transaction processing, less American Express gift cards purchased, and a higher risk of loan defaults. Through this time, American Express has tried to support its cardholders, recently offering temporary relief that included waiving interest and late payment fees. The Federal stimulus plan has helped the company rebound to an extent, and continued easing of restrictions on business operations and travel offer the opportunity for a comeback.
Hedge Funds and Institutions Are Selling
American Express has lost some hedge fund fans. Looking at second-quarter activity by hedge funds, the aggregate 13F shares held decreased to about 148.2 million from 152.9 million, an overall decrease of approximately 3.1%. Of the hedge funds, 41 created new positions, 104 added to existing holdings, 37 exited, and 100 reduced their stakes. Similarly, institutions also decreased their aggregate holdings by about 0.3%, to approximately 681.6 million from 683.7 million.
Mixed Multi-Year Estimates
American Express has a projected 16.6% decline in revenue for the end of 2020, with an estimated revenue growth of approximately 11.1% for the fiscal year 2021, for $40.4 billion in revenue. Year over year growth predictions continues through to 2022 with year over year growth of about 11% bringing revenue to $44.6 billion. There is similar news for share value, expecting that earnings will initially decline to approximately $3.46 by December 2020, later to rise to $6.76 by 2021 and ultimately to $8.83 by 2022.
Analysts Share Concerns over Timing of Recovery
Bank of America Securities, LLC has turned bearish on American Express due to travel recovery’s slow pace. Bank of America’s analyst, Mihir Bhatia, downgraded the stock to Underperform from Neutral due to concerns over the decreased airline and lodging spending. The analyst estimates that it could take until 2024 for travel spending to rebound to pre-pandemic levels. Similar concerns are shared by JP Morgan Securities, Inc., which notes an unprecedented disconnect between unemployment and credit during the pandemic. Predicting that while some credit losses may be averted for companies like American Express, while others may only be delayed.
Despite a rocky 2020, the story’s not over for American Express, and investors may see a happier chapter to come. While the exact timing for an economic recovery is uncertain, analysts believe it is likely for things to improve for American Express in just a few years.