Why American Express Stock Was Volatile Today

What happened

American Express (AXP -0.62%) had a volatile day on the stock market today, as it was down about 2.9% in morning trading. But the stock rebounded and was only down about 0.8% as of 11:50 a.m. ET, when it was trading at about $173 per share. The stock price is up roughly 17% year to date.

The major markets were all up on Thursday. The S&P 500 had gained 31 points (0.7%), the Dow Jones Industrial Average climbed 336 points (1%), and the Nasdaq Composite gained 77 points (0.6%) as of 11:50 a.m. ET.

So what

The primary catalyst for American Express's initial decline on Thursday morning was likely an analyst report from Citigroup. Citi analyst Arren Cyganovich put American Express on a 90-day negative catalyst watch due to short-term headwinds for the stock.

Specifically, the analyst issued the warning citing an expected slowdown in travel and entertainment spending, relative to other categories. Travel and entertainment spending is a major revenue center for the third largest credit card company in the U.S.

Citi maintained a sell rating on American Express and lowered its price target slightly, from $150 to $148.

Now what

American Express investors shouldn't be too concerned about this warning, and they appear not to be. The stock bounced back as the day went on.

It is just one analyst's prediction. Pulling back a bit, the 22 Wall Street analysts who cover American Express have a consensus price target of $181, which represents a nearly 5% gain from the current share price.

Investors should be looking well beyond the 90-day watch period, and American Express still looks like a solid hold. It is trading at a reasonable valuation, with a forward price-to-earnings ratio of 15. While it could flatten out over the next few months, depending on where the economy goes, it remains a good long-term stock, coming off a quarter where revenue gained 22% year over year.

Travel and entertainment spending was up 39%, and the company acquired 3.4 million new cards during the quarter, with surging demand from millennial and Gen Z customers.