American Express thwarts the naysayers

Posted Aug 28th 2009 3:45PM by Joseph Lazzaro
Filed under: American Express (AXP), Stocks to Buy

I'm Reiterating my Buy rating for American Express (NYSE: AXP), first recommended on April 27, 2009 at a price of $27.28. If you purchased American Express' shares then, you're up a modest 20% or so.

The pessimists regarding AXP have been off-the-mark. Don't misunderstand: we're still in an era of constrained credit with not enough capital (at least not enough capital deployed) for commercial operations, but credit market conditions are improving.

And so is American Express' credit outlook: charge-offs will stabilize in the quarters ahead, as early delinquencies slow, despite a likely, higher U.S unemployment rate. To be sure, AXP will not have the rate-of-return it had prior to the global financial crisis, but it's still adequate. The First Call FY2009/FY2010 EPS estimates for AXP are $1.08 to $1.68.

Stock Analysis: American Express is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in AXP now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your AXP position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $14.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: amex, inthenews

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Reader Comments (Page 1 of 1)

9-14-2009 @ 3:59AM

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