Why American Express Stock Dropped Today

American Express (NYSE: AXP) stock slipped 2.1% through 9:50 a.m. ET Tuesday after HSBC analyst Saul Martinez lowered his rating on the stock from buy to hold and BTIG analyst Vincent Caintic downgraded the stock from neutral to sell.

On the plus side, Barclays analyst Terry Ma raised the stock's price target to $250 -- but with the stock already selling for nearly $270 a share, that doesn't seem to be helping.

What HSBC and BTIG say about AXP

As StreetInsider.com reports, HSBC downgraded American Express stock primarily on valuation concerns, highlighting the stock's 47% rally year to date and warning that "the current stock price fully reflects these attributes" -- in other words, that there's no upside left in the stock. BTIG, however, had more fundamental concerns.

Covering the downgrade, TheFly.com writes today that "expectations for rapid improvement continue to climb" but American Express's business is actually "more likely to get worse than better." In particular, BTIG's analyst warns that macroeconomics look poor for "revenue growth, net interest income and credit trends."

As a result, BTIG worries that other analysts' expectations for 2025 sales and earnings are "unachievable."

Is American Express stock a sell?

But what are those expectations, exactly? According to Yahoo! Finance data, Wall Street on average forecasts that American Express will grow its sales 8.5% in 2025 but that it will grow its earnings by as much as 13.8%.

Maybe it can and maybe it can't -- but here's what should really worry investors:

American Express is priced at more than 20 times earnings already, and even assuming it does grow earnings 13.8% next year, the stock would be selling for a PEG ratio of 1.5. That isn't too expensive, but it also isn't cheap. And if American Express fails to hit the double-digit growth rate that other analysts are forecasting, the stock will look even more expensive, especially relative to cheaper financial alternatives such as Bank of America (14 times earnings) and JPMorgan Chase (12 times earnings).

From that perspective, BTIG may be right that investors should sell American Express and find a better bargain.

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American Express is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America and JPMorgan Chase. The Motley Fool has a disclosure policy.