The Sell American Express (AXP) Bandwagon Gets Bigger and Louder

It's not been a good week for American Express (NYSE: AXP) on Wall Street. Three tier-one bankers started coverage on the credit card company will rare "Sell" ratings. Are they right or is this capitulation?

Today Deutsche Bank was the latest to jump on the 'Sell Amex bandwagon'. Deutsche Bank initiated coverage on American Express with a Sell rating and $18 price target, saying short-term the company will likely be challenged by the weakest consumer spending in decades and possibly the highest credit losses in history. The firm said Amex's restructuring is made more difficult both structurally – given wholesale funding dependence—and cyclically—the downturn is likely to pressure consumers and its loans more than in the past.

Earlier in the week, Citigroup and Banc of America slapped their Sell ratings on the stock:

Citi said, "Citi analyst says, "We expect credit to deteriorate at a faster rate than the peers due to more aggressive growth in '06-'07. We are also concerned that the credit card ABS new issue market has closed, taking away a cheap source of financing. While AXP now has access to funding following bank holding company status, they may need to seek longer-term funding solutions. We also expect AXP to rely more on the "brokered deposit" market. AXP and the credit card industry also face regulatory/legislative risk." The firm set an $19 price target on American Express.

BofA said, "Number of factors will have a disproportionately negative impact on AXP's near-term prospects. These factors include 1) the significant consumer and corporate spending slowdown, 2) the accelerated loan book growth over the past few years, 3) geographic and demographic risks embedded in current receivables and 4) upcoming funding and liquidity obligations needing to be addressed in a stressed capital markets environment." The set an incredibly low price target of $13 on American Express.

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