馃挸 AMERICAN EXPRESS: DERIVATIVES TRADING 馃挸
American Express Company, together with its subsidiaries, provides charge and credit payment card products, and travel-related services worldwide. The company operates through three segments: Global Consumer Services Group, Global Commercial Services, and Global Merchant and Network Services. Its products and services include payment and financing products; network services; accounts payable expense management products and services; and travel and lifestyle services. The company's products and services also comprise merchant acquisition and processing, servicing and settlement, point-of-sale marketing, and information products and services for merchants; and fraud prevention services, as well as the design and operation of customer loyalty programs.
Pros:
- Acceptable margins and strong business [5y annualized growth: ≈12.5%]
- Nice correlation with SP500
- It is a favourite, AXP will not go bankrupt
Cons:
- Bad technical structure: despite it looks bullish, could be a bull-trap (distribution phase)
- A correction in the SP500 is likely where the index reaches ≈5,000 pts at most
- Slightly high valuation based on their last twelve months
The current EPS [31/12/23 TTM] is ≈ $11.23 USD and a possible PER spread could be (ceteris paribus):
- PER 14: ≈ $ 157.22 USD
- PER 19: ≈ $ 213.37 USD
Hypothesis:
AXP in the next 6 months (maybe 12 months) will have a distribution phase between $200 USD > $220 USD and an accumulation phase between $122 USD > $143 USD because the market could correct due to interest rate decreases and due to average rating.
Levels:
The next support zone is at ≈ $180 USD and the great support is at ≈ $128 USD. The next resistances zones are ≈ $201 USD, ≈ $210 USD and ≈ $213 USD. The ≈ $143 > $179 USD zone is an indifference price, an optimal suggested target could be ≈ $162 USD and all above ≈ $200 USD could be highly speculative.
Hedge example:
- Call [sell]]: $210 USD
- Cal [sell]: $200 USD
- Put [buy]: $180 USD
- Put [sell]: $142 USD
Risks:
A minor risk is that the price does not fall below $180 USD, but could be compensated with the profit of the Put at $142 USD. The worst risk is the price exceeds $210 USD or that the price will fall severely below $142 USD for much time; for any case, a close position is required. For the case where the stock falls below $142 USD, the investor will need to start an accumulation phase. For the case that the stock exceeds $210 USD, the $221 USD is their last big resistance to short.
The best analysis is yours!
M.F. J. Joel Padilla
Copyright: Joel Padilla 2023
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