American Express [$AXP], which typically serves at the behest of its deep-pocketed individuals and small businesses, likely can’t wait until the ball drops on December 31st. Shares have dipped over 5% for the year, marked by severe drop in airline travel, hotel stays, and restaurant entertainment.
Businesses are allowing people to work from home, leisure travel is stuck at the lows, and small businesses are struggling to survive public health shutdown orders. The Dow has jumped 6.3% while the S&P 500 index has steamed ahead 15.4% this year.
American Express pulls 60% of its revenue from merchant discount fees, 20% from interest on loans, and 20% from card fees, says Moffett Nathanson analyst Lisa Elllis, who dubbed the stock at a Buy earlier this month, with a price target of $155. PayPal & Square Are The New Wall Street Banks
2020 started strong for American Express, touching a new high of $138 before plummeting 51% to a low of $67 on March 18. It’s the same pattern as other stocks—since mid-March, the shares have steadily regained traction.
As expected, the pandy did some damage to the bottom line. Q1 earnings per share of 41 cents came in far below the expected $1.46, with Q2 earnings per share even lower, at 29 cents. Profit for the full year is estimated to be $3.31 a share versus $7.99 last year, while full-year revenue for 2020 is expected to come in at $36.2 billion versus $43.5 billion in 2019.
Vaccines and a return to normalcy could make American Express stock a bargain for those looking to get in on the reopening trend. It trades at a forward multiple of 17 compared to Mastercard’s [$MA] 40 and Visa’s [$V] 38. Surprise, Surprise: Coinbase Files IPO