Just this morning, analysts with Morgan Stanley downgraded American Express (NYSE:AXP) shares. Still, the company’s buy-side traders were apparently unfazed. AXP stock dipped briefly, but then went back into the green.
Led by Betsy Graseck, Morgan Stanley analysts lowered their rating on American Express shares from “overweight” to “equal weight.” Graseck is evidently concerned about recession risk, which might not be fully reflected in the stock’s price.
Indeed, the analyst appears to have a downbeat outlook on financial conditions in general. “Our Base Case bakes in slowing economic growth, while our Bear Case bakes in a recession with trough multiples,” Graseck wrote.
As you might expect, Graseck cited high inflation as a contributing factor. Inflation, she observes, is taking a “larger share of household disposable income.” Consequently, the Morgan Stanley analyst is bracing for lower consumer spending to negatively impact American Express.
Bear in mind, American Express relies on consumers’ spending activity. Furthermore, Graseck notes the company “skews highest to high-end consumers.” If these consumers are dealing with an economic slowdown, they might curb their spending. All in all, this could spell trouble for American Express.
What’s Happening With AXP Stock?
In the wake of this downgrade, traders might expect AXP stock would stay in the red today. However, the actual outcome might surprise you.
The American Express share price did fall briefly in early-session trading today. Yet, by 12:00 p.m. Eastern, the stock was actually in the green. Does this mean investors aren’t worried about a slowdown in consumer spending?
It’s possible they are concerned, but feel the worst-case scenario has already been priced into AXP stock. After all, shares were trading at nearly $200 in February, and have lost a lot of value since then.
Still, the Morgan Stanley analysts aren’t backing off from their bearish stance. They slashed their price target on American Express shares from $223 to $143. Cautious investors might want to keep this in mind, but will ultimately have to make their own buying and selling decisions in this challenging economic environment.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
