Options Trade – American Express Company (NYSE:AXP) Calls 
Tuesday, January 20, 2015

**OPTIONS TRADE: Buy the AXP Apr 2015 90.000 call (AXP150417C00090000) at or under $2.00, good for the day. Place a protective stop loss at $0.80 and a pre-determined sell at $3.80.

by Ian Harvey

January 20, 2015


Payment processor American Express Company (NYSE: AXP), together with its subsidiaries, provides charge and credit payment card products and travel-related services to consumers and businesses worldwide, has gotten off to a weak start in 2015, with shares falling 6.9% during the first three weeks of the year. The company should turn things around on January 21 when it reports fourth-quarter numbers. Amex will announce its quarterly numbers after the market close, with analysts expecting earnings of $1.38 per share. During the same period last year the company earned $1.25 per share.

Although American Express has struggled in recent weeks, an upbeat earnings report should help the stock form a level of support and trend higher. Holiday retail sales numbers were weaker than expected, but still represented a nice 4% jump versus the previous year, which should give credit card processors like American Express a nice earnings boost. The Commerce Department reported that total retail sales were up 3.2% in December versus the same period last year. If American Express hits its earnings forecast, it would represent 10.4% year over year earnings growth, and analysts have forecast 9% earnings growth in 2015.

Technical Details

The stock’s 50-day moving average is $92.06 and its 200-day moving average is $90.08. The company has a market cap of $95.335 billion and a P/E ratio of 16.79.

Why American Express?

• At the Goldman Sachs U.S. Financial Services conference, American Express revealed it was behind only MasterCard (NYSE:MA) in growing its income through the first nine months of the year:

• It should also be noted that AmEx watched its revenue rise by just 3%, so its sizable gain in income was attributable to disciplined expense management.

• Progress has also been made on several newer fronts, attracting additional partners to the OptBlue program, acquiring new card members on our EveryDay product, and participating in the upcoming Apple Pay mobile wallet launch.

OptBlue and EveryDay are products aimed at allowing American Express to be more widely used at merchants (in the case of OptBlue) and by consumers (in the case of the EveryDay card), which could provide meaningful growth opportunities for the company.

• American Express still trades at an attractive P/E of 16.2 and seeks to return 50% of its capital back to investors through dividends or share repurchases, the logical course of action would be to continue its sizable repurchase plans.

Analysts Opinions

Goldman Sachs upgraded shares of American Express Company from a neutral rating to a buy rating in a research note released on Wednesday morning, January 7th. They currently have $102.00 target price on the stock, up from their previous target price of $88.37.

The company has been also been the subject of a number of other research reports:-

• Analysts at Jefferies Group initiated coverage on shares of American Express Company in a research note on Wednesday, December 17th. They set a hold rating and a $95.00 price target on the stock.

• Separately, analysts at Morgan Stanley initiated coverage on shares of American Express Company in a research note on Wednesday, December 17th. They set an overweight rating and a $110.00 price target on the stock.

• Finally, analysts at Keefe, Bruyette & Woods raised their price target on shares of American Express Company from $113.00 to $117.00 in a research note on Tuesday, December 9th. They now have a market perform rating on the stock.

One research analyst has rated the stock with a sell rating, eleven have assigned a hold rating and nine have assigned a buy rating to the company’s stock. The company has a consensus rating of Hold and an average target price of $97.80.


The company's strengths can be seen in multiple areas, such as its growth in earnings per share, notable return on equity, good cash flow from operations, increase in net income and reasonable valuation levels.

The company has a good earnings track record, outpacing analyst estimates seven of the last eight quarters, and the one quarter it failed to beat estimates it reported earnings in-line with the consensus. The stock has a favorable valuation, with a P/E of 16, which is sharply lower than MasterCard (MA) and Visa (V), which have P/E ratios of 28.5 and 29.5 respectively. Expect an upbeat report and the stock to move higher on the release.

Therefore, based on the facts above the following options trade is recommended…..

**OPTIONS TRADE: Buy the AXP Apr 2015 90.000 call (AXP150417C00090000) at or under $2.00, good for the day. Place a protective stop loss at $0.80 and a pre-determined sell at $3.80.

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