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Citi downgraded American Express (NYSE:AXP) to Sell from Neutral, cutting the price target to $130 from $159 per share in a note to clients on Thursday.
In a note focused on U.S. consumer finance, analysts told investors that Citi’s economics team has forecast a modest U.S. recession as a base case in the second half of 2023.
“While the recession is projected to be mild, the impact to our EPS can be rather large as we are coming off of record low credit losses and are now forecasting slightly higher than normal credit losses in 2024,” the analysts wrote.
Citi feels American Express is one of the stocks that could be challenged during the forecasted recession as economic data “likely worsens into next year.”
“While we believe American Express is a great company with a platform for growth in the future, we are concerned about the stock over the next 12-18 months. AXP has less credit loss sensitivity than peers, but faces consumer spending cyclicality during periods of recession,” added the analysts. “Our downgrade of American Express reflects our view that potential for lower billed business has not been fully contemplated by investors as spending volume in past recessions has turned negative (we are modeling a slowdown to 2% growth but not negative).”
