Can American Express Stock Outperform The Broader S&P 500 After Coronavirus Crisis?

by Trefis Team
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American Express Company
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American Express (NYSE: AXP) stock has fared worse than the broader markets through the current crisis but it will likely bounce back strongly and potentially outperform as the crisis winds down. For perspective, the stock rose 245% between March 2009 and January 2010, compared to a 48% rise for the S&P – something we detail in our interactive dashboard analysis on 2007-08 vs. 2020 Crisis Comparison: How Did American Express Stock Fare vs. The S&P 500?

The stock market witnessed a major sell-off on 9th March and has continued its downward spiral since then (through March 12). There were two distinct trends driving the sell-off. Firstly, the increasing number of Coronavirus cases in the U.S and other countries outside China is causing mounting concerns of a global economic slowdown. Secondly, a sharp decline in crude oil prices after Saudi Arabia increased production in a price war with Russia. American Express stock fell nearly 23% over the last four days and is down by a total of around 30% since early February. This is in response to the expected impact that the outbreak and a broader economic slowdown could have on consumer spending and the global credit card industry. Further, the company has co-branding card arrangements with several hotel chains and airlines e.g., Delta Air Lines, Marriott International, British Airways, Hilton Worldwide Holdings, etc. Notably, the Delta co-brand portfolio represented approximately 8% of its worldwide billed business and approximately 22 percent of worldwide Card Member loans as of December 31, 2019. With hotel occupancy rates and the global travel industry being worst hit by the Coronavirus outbreak due to travel bans and widespread panic, it could impact the credit card giant’s revenue prospects for the year.

American Express Company Performance During 2020 Coronavirus/Oil Price War Crisis

  • American Express stock declined by about 23% from Monday, March 9th through March 12, and the stock is down by about 30% since February 1, after the WHO declared a global health emergency.
  • On the other hand, the S&P 500 declined by 17% over the last 4 days (March 9-12), and has fallen by 26% since February 1, after the global health emergency was declared by the WHO.
  • In comparison, Mastercard, which is a payment services giant, saw its stock fall by about 24% since early February and by about 16% over the last 4 days. View our analysis for Mastercard here: 2007-08 vs. 2020 Crisis Comparison: How Did MasterCard Stock Fare Compared with S&P 500?

American Express Company Stock Performance Over 2007-08 Financial Crisis

  • AXP stock declined from levels of around $49 in October 2007 (the pre-crisis peak) to levels of around $10 in March 2009 (as the markets bottomed out) and recovered to levels of about $35 in early 2010.
  • Through the crisis, AXP stock declined by as much as 80% from its approximate pre-crisis peak. This marked a sharper decline than the S&P which fell by as much as 51%.
  • However, the stock recovered strongly, rising by 245% between March 2009 and January 2010. In comparison, the S&P rose by about 48% over the same period.

Conclusion

Although American Express’ stock has declined due to the Coronavirus/Oil Price War crisis, going by trends seen during the 2008 slowdown, it will likely bounce back strongly and potentially outperform as the crisis winds down.

 

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