Downgrading One Portfolio Holding, Upgrading Another
We continue to favor their business models.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
Following a more than 35% gain in American Express AXP, which has pushed the shares past our $310 price target, we are downgrading the stock to a Two rating from One.
In keeping with our comments this morning about the McClellan Oscillator, we could see AXP melt up higher in the near-term, which would likely push their relative strength index higher from the current 72.57 reading, and deeper into overbought territory. Should that happen, the prudent move would be to lock in some of those big AXP gains.
We will remain owners of AXP shares, looking to tap into what is expected to be Amex’s biggest overhaul for its Platinum cards. In the past, such moves have expanded the array of benefits offered to members, but they have also included a membership price hike. Those aggregate benefits defray the membership price tag, and we expect that will remain the case.
We continue to favor the company’s membership business model given the large impact on Amex’s profits and bottom-line earnings. As we learn more about this forthcoming upgrade, we suspect a price target increase will be in the cards, and odds are we won’t be the only ones.
We're Upgrading Costco
At the same time, we will use the recent retrenchment in Costco COST from their early June highs to upgrade the shares to a One rating from Two. While our price target on the shares remains $1,200, we continue to see Costco nabbing consumer wallet share as consumers tap its warehouse offerings and the company continues to expand its footprint.
As we move into the second half of 2025, the company’s high-margin membership fee revenue stream should see a more pronounced impact from its September 2024 price hike. The next known catalyst for COST shares will be the company’s June sales results on July 9.
At the time of publication, TheStreet Pro Portfolio was long AXP and COST.
