American Express Slumps 2.8%—What’s Driving the Selloff?

• AXP plunges to $311.97, down 2.79% intraday, hitting a session low of $311.16.
• Monness downgrades to Neutral, citing valuation saturation after a 45% YTD rally.
• Analysts project $3.86 EPS and $17.69B revenue, with loan metrics surging 12–15% YoY.
• Sector leader COF also weakens, falling 1.88%, amid broader credit services underperformance.

American Express faces a pivotal crossroads as technicals turn bearish and Wall Street reevaluates its premium multiple. The stock’s sharp drop underscores investor skepticism toward its near-term growth ceiling, despite robust loan growth metrics ahead of earnings.

Valuation Ceiling Hits as Earnings Forecasts Face Realities
The sell-off stems from Monness Crespi Hardt’s Neutral downgrade, which highlighted AXP’s 45% year-to-date rally has priced in most near-term positives. Analysts note the stock now trades at 19.5x forward earnings—near its 93rd percentile historical multiple—leaving little room for expansion without a sudden EPS acceleration. While loan portfolios (e.g., +14% YoY in U.S. Consumer Services loans) and network volumes ($465.8B estimate) signal operational strength, traders are demanding clearer evidence of margin resilience amid stagnant affluent spending trends. The downgrade coincides with a MACD crossover (7.39 vs. 7.58 signal line) reinforcing short-term bearish momentum.

Credit Services Struggles, COF Leads Weakness
The Credit Services sector mirrors AXP’s struggles, with leader COF down 1.88% as regulatory and macroeconomic pressures weigh. While AXP’s loan metrics outpace peers, its premium multiple and earnings visibility gap with regional banks like CBU create valuation drag. The sector’s underperformance reflects broader investor caution toward financials amid Fed policy uncertainty and medical debt rule reversals.

Bearish Technicals and Top Option Plays for the Downturn
Technicals show AXP below its 30-day MA ($307.08) with Bollinger Bands narrowing toward a breakout. RSI at 69.3 signals overbought conditions, risking a pullback to 200-day support at $289.07. AXP20250725P295 and AXP20250725C315 stand out for bearish and neutral strategies:

• AXP20250725P295 (Put): Strike $295, Theta -0.0406, Gamma 0.0135, IV 34.61%. Leverage ratio 178% offers 75% gains if AXP drops to $290. Its delta (-0.17) suggests modest downside protection.
• AXP20250725C315 (Call): Strike $315, Theta -0.7728, Gamma 0.0199, IV 36.61%. With delta 0.449, this in-the-money option gains 9% if price holds $315—ideal for cautious bulls.

In a 5% downside scenario ($311.97 → $296.42), the put’s payoff would hit $1,045 (max $295-$290 strike spread), while the call erodes to zero. Aggressive shorts should target the $286.60 lower Bollinger Band, while buyers await a bounce above $319.45’s intraday high.

Backtest American Express Stock Performance
American Express (AXP) has historically shown positive short-to-medium-term performance following a -3% intraday plunge. The backtest data reveals that:1. Frequency and Win Rates: Such events have occurred 577 times over the past five years. The 3-day win rate is 50.78%, the 10-day win rate is 54.42%, and the 30-day win rate is 53.03%. This indicates a higher probability of a positive rebound in the immediate aftermath of the plunge.2. Returns: The average 3-day return following the event is 0.11%, with a maximum return of 0.23% on day 15. The 10-day return is slightly higher at 0.18%, with a maximum return of 0.32% on day 21. The 30-day return is 0.13%, with a maximum return of 0.24% on day 30.3. Max Return Days: The maximum return following a -3% intraday plunge tends to occur within the first 30 days, with the highest returns seen on days 15 and 21.In conclusion, American Express has a favorable track record of bouncing back after a significant intraday decline. Investors might consider this information when assessing the potential risks and rewards of investing in AXP following such events.

Hold or Sell? AXP’s Crossroads Ahead
AXP’s decline highlights a critical valuation reckoning as multiple expansion hits limits. Near-term focus remains on Q2 earnings (July 25) and whether loan growth can offset stagnant affluent spending. Traders should watch the $295 put cluster and $310 psychological support—failure there opens a slide to $289. Sector leader COF’s 1.88% drop signals broader weakness, but AXP’s premium metrics require clearer catalysts to revive momentum. Action Alert: Sell into rallies above $319 or layer puts below $295 as the market digests earnings risks.