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Pro Analysis

American Express ready for post-Costco rebound: Citi

People walk in front of the American Express offices in New York City.
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People walk in front of the American Express offices in New York City.

Shares of American Express are set to rebound as the credit card provider finally puts the loss of its exclusive Costco deal behind it and as loans to small businesses pick up, said Citi Research, which reiterated its buy rating.

"We recently hosted investor meetings with AXP's CFO Jeff Campbell and Toby Willard/John Hall from IR. We came away from our trip believing the shares offer an attractive risk/reward, with low expectations baked in," Citi Research's Donald Fandetti wrote in a Monday note to clients.

"The key to the stock will be improving the current revenue growth rate (5 percent y/y) and showing healthy core business trends as Q3 will be the first full quarter without Costco."

The retailer said in February 2015 it was dropping American Express after a 16-year relationship. The shares are down more than 20 percent since that announcement. Shares of Visa, which landed the exclusive partnership with Costco, are up more than 20 percent since then.