American Express shares plummeted Friday after it offered a dim profit outlook that highlighted intensifying competition for high-end customers and announced plans to cut $1 billion in spending.
The banking and credit card company sank 12.6 percent to $54.78 in afternoon trade, by far the biggest loser in the Dow on an up day for stocks.
Investors fled the stock after chief executive Kenneth Chenault outlined a range of hurdles facing the company, including overall economic sluggishness, pressures on merchants' fees and "intense competition that has been reshaping the payments industry."
News that the company plans $1 billion in spending cuts fell flat with investors who are looking for details on how AmEx can better exploit its affluent client base in the mobile era, said Morningstar analyst Jim Sinegal.
"No one thinks that cutting costs is going to allow them to change their business model," Sinegal said.
"If they had said they were going to put a lot more money into big data or acquiring some analytics firms, that would have reinforced" a more positive narrative, he said.
Amex reported adjusted fourth-quarter earnings of $1.23 per share, 10 cents above analyst expectations. But the company's forecast for 2017 of $5.60 per share came in 39 cents below analyst expectations.
"We are not seeing decelerating trends," Chenault said of the economy. "We are certainly not seeing in the overall economy catalysts that would say that we there are going to be improvements in GDP growth."
Sinegal said that AmEx's longstanding ability to win higher fees from merchants is being challenged as competitors like JPMorgan Chase and Bank of America chase after its base of affluent cardholders. Some of these companies have launched award programs with vendors that further challenge AmEx.
AmEx must back up talk of using big data with a specific game plan to persuade vendors of the benefits of higher AmEx fees, he said.
"Now they're selling rich customers," Sinegal told AFP. "What they need to be doing is selling rich customers' data."