American Express shares rise after Deutsche initiates at buy, sees 20% upside in 2018

Published Wed, Jan 3 201812:04 PM ESTUpdated Wed, Jan 3 20184:19 PM EST

American Express stock rose Wednesday after Deutsche Bank initiated coverage on the card company with a buy rating. A renewed focus on small business helps prove that American Express's model remains "intact," while its devotion to super prime and affluent customers bodes well for 2018, according to analyst Ashish Sabadra. "We are initiating coverage on American Express, global leading closed-loop card issuer, with a Buy rating and target price of $118," wrote Sabadra in a note to clients Wednesday. "Leading closed-loop network provides a competitive edge which, along with 'spend-centric' business model, differentiates it from peers." The analyst's 12-month $118 price target is nearly 20 percent higher than the stock's closing price on Tuesday. Such a climb would add to the company's sizable 32 percent run up over the past year. Shares closed 0.6 percent higher. A key component of Sabadra's thesis is OptBlue, an initiative by American Express introduced in 2014 that allows smaller businesses to accept American Express cards with more flexible fees, according to the company's website . Those who sign up for the platform can automatically bundle American Express along with other major card brands they already accept in addition to avoiding the historically steep fees. "OptBlue is another strategy that plays into American Express's ability to have market pricing power by simply expanding their reach and piece of the global pie," added Sabadra. Another "underappreciated" aspect of the business, according to the analyst, is the commercial card and corporate loan business. American Express should be able to expand further into the global commercial card space, said Sabadra, with early successes enabling it to affect airline and hotel rates for its members. In September, the company said that it would be launching a new card, called Blue Delta SkyMiles, that's aimed at new travelers, mainly millennials. AmEx has been competing with J.P. Morgan Chase for customers willing to pay high fees. Chase's widely popular Sapphire Reserve card wooed consumers with fat travel credits and other perks, such as airport lounge access.

American Express

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American Express stock rose Wednesday after Deutsche Bank initiated coverage on the card company with a buy rating.

A renewed focus on small business helps prove that American Express's model remains "intact," while its devotion to super prime and affluent customers bodes well for 2018, according to analyst Ashish Sabadra.

"We are initiating coverage on American Express, global leading closed-loop card issuer, with a Buy rating and target price of $118," wrote Sabadra in a note to clients Wednesday. "Leading closed-loop network provides a competitive edge which, along with 'spend-centric' business model, differentiates it from peers."