What happened
American Express (AXP 0.85%) saw its share price rise today, as it was up 3.7% as of 12:20 p.m. ET on Friday. The stock was trading at about $156 per share at that time, up nearly 6% year to date.
Overall, the markets were up on Friday, as the S&P 500 rose 46 points (1.1%), the Dow Jones Industrial Average gained 290 points (0.9%), and the Nasdaq Composite surged 248 points (2%) as of 12:20 p.m. ET.
So what
The primary catalyst on Friday for the credit card provider was favorable comments from a major stock market analyst.
Morgan Stanley's Betsy Graseck reiterated her $188 per-share price target for the investment banking firm in a research note on Friday and maintained an overweight rating. Graseck said the stock was at an "attractive entry point" with a forward price-to-earnings multiple of around 13.
The Morgan Stanley analyst added that American Express's resilient revenue growth, improving credit quality, and strong operating leverage make the company's potential earnings growth more durable than anticipated.
Now what
In its guidance for 2023, American Express called for revenue growth in the range of 15% to 17% and earnings per share in the vicinity of $11 to $11.40. The EPS growth would be between 11% and 15% higher than 2022. Graseck felt the company was on track to hit those targets.
In the first quarter, American Express acquired 3.4 million new credit card customers, with the Consumer Platinum and Gold and U.S. Business Platinum cards hitting record highs. A surge in millennial and Gen Z customers drove the growth, as spending from those cohorts was up 28% year over year.
Rising provisions for credit losses in the quarter took a bite out of earnings, which remains a short-term concern with the economy potentially slowing down. But long term, American Express is very attractive at this valuation, although the $188 price target seems a bit high, given the economic headwinds and their potential impact on credit quality.
