Morgan Stanley upgrades American Express, says customers should continue spending despite inflation
A higher-income leaning customer base should position American Express well to ride out a year projected to see a strong uptick in delinquencies, Morgan Stanley said. Analyst Betsy Graseck upgraded shares of the payments card issuer to overweight from equal weight, saying that credit losses pose less of a risk given the company's higher credit score customers.
Moderating marketing and non-card operating expenses should provide about 400 basis points of positive operating leverage for the company going forward, the largest for the company in over a decade. This also positions the company as the "only positive operating leverage and EPS growth stories" within the firm's coverage through 2024, she noted. Given this backdrop, Graseck said that shares of American Express warrant a valuation premium to peers.
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