American Express (AXP) shares edged lower in Friday’s pre-market session as analysts at Janney Capital lowered their price target on the credit-card company’s stock to $94 per share from $101 a day after American Express said its U.S. co-brand and merchant acceptance agreements with Costco Wholesale
(COST) are set to end on March 31, 2016.
To reflect the end of the agreements, Janney also lowered its 2015 and 2016 EPS estimates for AXP to $5.41 and $5.86 from $5.65 and $6.33, respectively. Still, the firm maintained its investment buy rating on the stock.
In a note to clients, Janney said while some investors may be worried that the end of the COST contract will lead to the loss of other important co-brand partners, it believes AXP was right to end the deal. Janney said that the COST deal couldn’t meet its desired hurdle rate, adding AXP has better places to use its capital.
“While the loss of its co-branding partnership with Costco in the US is meaningfully negative in the near term, we believe that American Express should be able to overcome the drag on EPS growth by 2017,” the firm told clients in the note.
In Friday’s pre-market activity, shares of AXP edged down 0.5% to $80.05 recently, within a 52-week trading range of $78.41 to $96.24.
