BofA lifts American Express to Buy on recession resiliency, attractive valuation

Investing.com -- Bank of America (BofA) upgraded American Express (NYSE:AXP) shares to Buy from Neutral on Friday, noting that the latest market downturn “offers long-term oriented investors an opportunity to buy a high-quality company at a reasonable valuation.”

While the uncertain macroeconomic climate and a potential slowdown in GDP growth remain overhangs, the bank’s analysts see American Express's robust customer base as a key factor in sustaining durable earnings and managing credit losses effectively.

“Amex’s best-in-class management has been adept at navigating prior downturns and we think this time will be no different,” analysts said.

BofA’s bullishness on AXP is partly driven by its unique position in the credit card industry, with analysts emphasizing the company’s spend-centric model, high-end cardholders, and the ability to adjust expenses.

These factors are expected to contribute to the company's earnings resilience. In fact, historical data indicates that American Express's shares have previously outperformed not only other card issuers but also the broader S&P 500 during periods of economic stress.

The upgrade reflects confidence in the spending power of high-income consumers, who make up a significant portion of American Express's customer base.

According to BofA, this demographic has demonstrated more robust spending patterns, which is supported by aggregated credit and debit card data.

Furthermore, American Express's largest partner, Delta, has reported that spending on their co-branded cards saw double-digit growth in the first quarter of 2025.

However, to reflect the uncertainties related to tariffs and a likely GDP slowdown, BofA has revised its forecasts for American Express.

The bank has lowered its revenue growth and EPS forecast for 2025 to 7.2% and $14.76, down from 8.3% and $15.23, respectively, and cut the price target on the stock to $274 from $325.

Also, BofA has increased its credit reserves to prepare for potential macroeconomic strains, although it has not altered its loss forecasts, citing stable delinquency data.