Stock (Symbol) |
American Express (AXP) |
Stock Price |
$272 |
Sector |
Financial |
Data is as of |
October 22, 2024 |
Expected to Report |
February 20 |
Company Description |
American Express Company is a globally integrated payments company.
The Company provides its customers with access to products, insights, and experiences that builds business. It operates under four segments: U.S. Consumer Services (USCS), Commercial Services (CS), International Card Services (ICS), and Global Merchant and Network Services (GMNS). USCS offers travel and lifestyle services as well as banking and non-card financing products. CS offers payment and expense management, banking and non-card financing products. CS also issues corporate cards and provides services to select global corporate clients. ICS also provides services to international customers, including travel and lifestyle services, and manages certain international joint ventures and its loyalty coalition businesses. GMNS provides multi-channel marketing programs and capabilities, services and data analytics. It provides credit and charge cards to consumers, small businesses, mid-sized companies and corporations. |
Sharek’s Take |
In last quarter’s earnings call, American Express (AXP) said it enhanced dining perks with the recently acquired Resy, Tock, and Rooam. Resy and Tock are a reservation platforms, while Rooam allows users to pay their tab at restaurants using their mobile phone. In the earnings call, AMEX management stated that they successfully scaled Resy since acquiring the company in 2019 with over 50 million registered users. And in the last 12 months, the platform has seated over 350 million diners. Millennials and Gen-Z customers spend 2x more on dining and were 80% of new US Gold Cards last qtr. US Millennials and Gen-Z spending rose a solid 12% last qtr, while Internationally this age cohort increased its spending 23%.
American Express is a globally integrated payments company in providing credit and charge cards to individuals and businesses with high credit scores. The company is both a card issuer (like Chase and Citi) and a card network (like MasterCard and Visa). American Express’ integrated payments platform has direct relationships with Merchants and Card Members, creating a closed loop so Amex has direct access to information. The company can analyze info on spending to underwrite risk, reduce fraud and do targeted marketing. What makes American Express special is its Membership Rewards program, which include benefits such as airport lounge access, dining experiences, and other travel benefits. The company has been attracting younger, Millennial and Gen Z customers. In the US, these customers were more than 60% of new accounts in 2023. In addition, 75% of new Consumer Platinum and Gold accounts acquired in the US were from this group of individuals. Here’s a short history of American Express:
AXP engages in businesses comprising four operating segments:
American Express is a reasonably safe stock that is part of the Dow Jones Industrial Average. This stock does have some credit risk, as the company holds credit card loans, unlike Visa and MasterCard. There have been years during the past decade when profits haven’t hit All-Time highs. Thus, this stock doesn’t have the great certainty that MasterCard and Visa possess. In 2023, AXP spent $5.3 billion on stock buybacks and dividends. The dividend was just increased 15% to $2.80 on an annualized basis. AXP has an Estimated Long-Term Growth Rate of 16% and a dividend yield of 1%. I used to consider this a ten percent grower (Est. LTG + yield) long term, but now management aspirations are mid-teens profit growth. AXP is part of the Conservative Portfolio. With a P/E of just 18, this stock has room to move higher. |
One Year Chart |
AXP stock has been pushing higher. After earnings was reported, stock declined as AXP experienced slowness in billings due to people being tight with their money.
The P/E of 18 is based on 2025 profit estimates as we are in AXP’s Fiscal Q4 and I’m now looking ahead to next year. I think the P/E can get up to 22. Analysts have an Est. LTG of 16% on this stock. That’s good, but the stock had been growing faster in recent years. |
Earnings Table |
Last qtr, American Express delivered 6% profit growth and beat estimates of 1% growth. Revenue (net of interest expense) increased 8% and barely missed expectations of 9%. The company acquired 3.3 million new cards during the quarter. Revenue breakdown was:
AXP’s Billed Business grew 6% and was driven by 6% growth in Goods & Services spending and 6% growth in Travel & Entertainment spending. US Consumer grew billings by 6% this quarter. Millennial and Gen Z customers grew their billings by 12%. Management stated that Millennial and Gen-Z consumers, who represent 80% of the new accounts acquired on the U.S. Consumer Gold Card, and remain our fastest growing consumer cohort overall in the US. International Card Members spending was up by 13%. Revenue growth was primarily driven by higher net interest income supported by growth in loan volumes and stable growth in Card Member spending. Annual Profit Estimates are higher this qtr. Management expects revenue growth of around 9% for 2024. Qtrly profit Estimates are for 14%, 5%, 9%, and 11% growth the next 4 qtrs. Analysts estimate AXP’s revenue will grow 9% next quarter. |
Fair Value |
This stock currently has a P/E of 20 when we use 2024 profi testimates.
My Fair Value is a P/E of 22, and if we use 2025 profit estimates, that equates to a $332 stock, around 22% higher than the recent quote. If we use 2026 estimates with P/E of 22, stock price would be $378, giving it upside of 39%. |
Bottom Line |
American Express (AXP) has had an erratic profit history. Also, the stock hasn’t been a steady grower the past decade. But notice profit growth is estimated to be 19% this year. The company is a good groove.
AXP is very popular among young customers, who are really the driving force behind the company’s recent growth spurt. And more dining apps are helping push revenue as well. AXP stays at 4th in the Conservative Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Growth Portfolio 4 of 23 |