HSBC and BTIG Downgrade American Express Rating Due to Valuation and Slowing Fundamentals

American Express Company (NYSE: AXP) has recently faced downgrades from two investment banks, HSBC and BTIG, due to concerns regarding the stock’s valuation and declining fundamentals.

HSBC has reduced its rating on AXP shares from Buy to Hold, primarily citing the stock’s significant increase in value. Year-to-date, the stock has risen by 47%, and over the last 12 months, it has surged by 85%, markedly outperforming the S&P 500, which saw gains of 21% and 33% in the same time frames.

While acknowledging American Express’s robust economic model, manageable credit risk, and appeal to younger consumers, HSBC experts noted the company’s successful product innovation and strong brand. However, they believe the current stock price adequately reflects these strengths. They expressed concerns regarding the company’s revenue growth, suggesting that realizing a target of 10% annual revenue growth could be challenging without a boost in economic growth.

Valuation also emerged as a critical concern for HSBC. The stock currently trades at a multiple of 20.3 times the consensus earnings estimate for the upcoming year, significantly exceeding its 10-year average of around 15 times. This valuation is only marginally below the historically high price-to-earnings ratio of the S&P 500, a comparison that has been observed infrequently in the last decade. Analysts emphasized the difficulty in justifying why AXP should trade at or above the market’s average multiple, given the substantial credit portfolio, its status as a systemically important banking institution, and its sensitivity to economic fluctuations.

HSBC has raised its price target for American Express slightly from $265 to $270.

On the other hand, BTIG has also downgraded AXP from Neutral to Sell, citing two main factors. First, the firm foresees increased risks to the company’s fundamental financial metrics, including billed business, revenue growth, net interest income, and credit trends. Secondly, BTIG believes the current stock price already reflects overly optimistic expectations for 2025, including anticipated earnings per share and revenue growth, which they consider unlikely to be achieved.

BTIG’s team remarked, “In other words, substantial improvement in Amex’s fundamentals is necessary just to maintain AXP’s current share price.” The firm has maintained its price objective for the stock at $230.