The recent selloff in American Express stock was “overdone,” according to Morgan Stanley. With shares trading at their cheapest levels in years, the company thinks now is a good entry point for investors. Morgan Stanley has an overweight rating on American Express stock, calling it a top pick. His price target of $188 means the stock will rise 24.4% in the coming months. “Amex hasn’t traded this cheap on a P/E since 2019, at a 12x P/E price amid a sharper slowdown in growth. Yes, discretionary spending is slowing, but this is already baked into consensus estimates,” wrote analyst Betsy Graseck. in Friday’s note. “From here, AXP offers 1) the highest revenue growth, 2) strong operating leverage, 3) better credit quality,” she added. Shares of American Express struggled with an 8% loss this quarter. They grew by 2.3% year-on-year. Graseck said that while sales growth is slowing after the post-Covid boom, it will remain more resilient than expected. She noted that stock valuations are now slowing too much, implying only about 7% growth over the next two years. Meanwhile, Morgan Stanley estimates around a 13% compound annual growth rate. She added that while loan growth is very strong, Amex’s loan and receivables balance is still low compared to pre-Covid levels. — CNBC’s Michael Bloom contributed to this report.
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