The profit outlook for American Express Co. dimmed further this week as its stock received a downgrade and another analyst cut his price and profit targets.
A team of Goldman Sachs Group Inc. analysts led by Richard Ramsden downgraded Amex's stock Wednesday to "sell," from "neutral."
They predicted that the company's bottom line "will be roughly break-even in 2009-2010," excluding settlement payments from Visa Inc. and MasterCard Inc.
The analysts cited "rapidly rising credit costs, as losses could ultimately reach 10-12%."
Also Wednesday, Donald Fandetti of Citigroup Inc., who already had a "sell" rating on the stock, cut his target price by $5, to $9 a share.
He also cut his earnings estimates by 57 cents for this year, to 68 cents a share, by 85 cents for next year, to $1.15, and by 50 cents for 2011, to $2.
The lower profit estimates reflect "higher unemployment, lower spending expectations and recent master trust credit charge off statistics," Fandetti wrote in a note.
Last month Amex said the chargeoff rate in its securitized master trust surged 106 basis points from December, to 8.3% in January. Fandetti called that performance "surprisingly bad," especially since other issuers' loss rates rose just 30 to 50 basis points.
"The spike in chargeoffs suggests a large provision is likely as we progress through '09," he wrote. "The data also shook the confidence of some core investors."
By midday Thursday, Amex shares had risen 1.4% from Wednesday's close, to $12.10. However, the stock was off more than 75% from its 52-week high in May.
