U.S. stocks closed higher Friday, with all three major benchmarks booking weekly gains as investors shook off concerns about credit losses at regional banks and trade tensions.
The best-performing concepts is Consumer Finance. Considering the different perceptions of the stock, this time TigerPicks chose $American Express(AXP)$ to have a fundamental highlight to help users understand it better.
In the past five days, AXP's share price has risen by 9.60%, and surged by 7.27% compared with the same period last year.
$American Express(AXP)$
American Express Company is a globally integrated payments company with card-issuing, merchant-acquiring and card network businesses. It offers products and services to a range of customers, including consumers, small businesses, mid-sized companies and large corporations around the world.
Over the past year, shareholders have seen a nice 21% gain. After the most recent earnings update, the stock has really shown some strength. But I think American Express is still a buy, even though the price isn’t exactly cheap right now.
Stock Price
Last quarter, Amex added over three million new cards. Average fees per card are climbing and spending from international customers is growing even faster. The company’s top marks in customer satisfaction studies only add to the story.
To me, the takeaway is that Amex is a lot more than just another credit card company. It’s built a business model that is tough to copy and keeps finding ways to get more from its customer relationships.
Why Amex’s Niche Protects It from Disruption
There’s no shortage of change in payments and consumer finance right now. New players are popping up, digital wallets and pay-later options are growing and competition is fierce. But if you look at the wealthiest customers, those who care about rewards and top-tier service, Amex still owns that space.
Other big companies like $Capital One(COF)$ and $Warner Bros. Discovery(WBD)$ are joining forces, while $MasterCard(MA)$ and $Visa(V)$ are leaning into new tech and crypto. But Amex stands apart because it focuses on customers who spend a lot and tend to pay their bills on time. Amex makes money from both fees and interest, which helps steady its performance when rates go up or when people start feeling more pressure on their finances.
It’s true that tech-driven companies could make things harder for Amex in the future. So far, though, Amex has managed to turn new tech into an advantage, using better data and partnerships to keep customers engaged. It’s picking up business overseas and among younger people, giving it a pretty long runway for growth.
Card Member Credit Metrics
The Financials Back Up the Story
In the third quarter, Amex grew its revenue by 11%, bringing in $18.4 billion. Earnings per share jumped 19% to $4.14 and return on equity hit 36%. The company now expects revenue to grow between 9% and 10% this year, with earnings per share in the range of $15.20 to $15.50, a target it just bumped up after the latest results.
Summary Financial Performance
Spending by U.S. consumers is up 9% and the numbers are even better for Millennials and Gen-Z, with growth as high as 39% year over year. International spending is also on the rise and more people are choosing cards that come with a fee, which helps boost average revenue per card. Business volume across Amex’s network keeps trending higher.
U.S. Consumer Services Billed Business
The company’s loan losses and delinquencies have barely budged, staying low at about 1.3% for delinquencies and 1.9% in net write-offs (2.2% including interest and fees). That’s thanks to Amex’s high-quality customer base.
The balance sheet looks strong, with about $55 billion in cash on hand, a good cushion of deposits and a manageable level of debt. Amex keeps returning money to shareholders, both through dividends and buybacks, sending back $2.9 billion last quarter.
Why the Stock Isn’t Cheap but Still Worth Buying
There’s no denying that Amex trades at a higher price than a lot of its peers. The stock is priced at about 23 times this year's expected earnings. Its price-to-book ratio is up there, too but it matches the company’s high return profile.
Wall Street expects earnings to keep rising, with 2025 forecasts at $15.33 per share and further increases in the next couple of years. The current price makes sense if Amex keeps hitting its goals and maybe even beats them.
Capital Return & Common Shares Outstanding
Amex recently had a blowout quarter, beating expectations on both revenue and profits. The mood among investors is positive but not over the top. Analysts have pointed out that the stock isn’t a bargain but most agree that management keeps delivering. After some minor dips related to worries about rates and consumer credit, the stock bounced back strongly once the company posted strong Q3 results.
In my opinion, as long as Amex keeps showing it can grow cards and manage its costs, sentiment will stay positive. If there’s a stumble, that’s probably an opportunity for patient investors, not a reason to run away.
Conclusion
I still think American Express is a buy for people looking to hold a quality stock for years, not months. It’s not a bargain but it’s a proven winner that keeps finding ways to grow and reward shareholders.
There’s a lot of talk about new competitors or economic worries but Amex’s reputation and loyal customers make it tough to bet against. The company’s focus on the premium end of the market is still paying off and its ability to roll out new perks and tech shows it’s not standing still.
If you’re thinking long term, I see Amex as a solid part of any portfolio. It’s worth keeping an eye on the usual things, like new customer growth and profit margins but if Amex keeps doing what it’s been doing, I think the stock will keep working for you. For me, it’s about quality, trust and sticking with a company that knows how to win over time.
In short, I would buy American Express and look to add more if the market gives you a chance. This is the kind of business you want to own when you care about steady growth and a brand that stands the test of time.
Stock Price Forecast:
Here are the target price forecasts for the next 12 months from analysts.
Based on 21 Wall Street analysts offering 12 month price targets for American Express in the last 3 months. The average price target is $344.94 with a high forecast of $394.00 and a low forecast of $277.00. The average price target represents a -0.48% change from the last price of $346.62.
Resource:
https://seekingalpha.com/article/4830984-why-american-express-is-still-worth-buying-for-the-long-run
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