We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
AmEx Stock Trades Near 52-Week High: Is It Still Worth Buying?
Read MoreHide Full Article
American Express Company (AXP - Free Report) closed at $266.17 on Wednesday, just 2.3% shy of its 52-week high of $272.41. Its shares have gained 16.5% in the past three months, outperforming the industry and the S&P 500 Index. Over this time frame, the industry and the S&P 500 Index gained 1.2% and 3.8%, respectively. Due to its solid prospects, AXP even outperformed its peers Mastercard Incorporated (MA - Free Report) and Visa Inc. (V - Free Report) , which have gained 10.5% and 1.1%, respectively, in the same time frame.
AXP’s 3-Month Price Performance
Image Source: Zacks Investment Research
The proximity to its 52-week high underscores investors’ confidence and market optimism about this payments company’s prospects. Moreover, the stock is trading above its 50-day and 200-day moving averages, signaling strong upward momentum.
Now, let's see how recent developments might act in favor of AXP in the near term.
Fed-Funds Rate Cut Impact on AmEx
On Sept. 18, 2024, the Federal Reserve announced the long-awaited benchmark interest rate cut of 50 basis points. A rate cut is good news for a credit card company like American Express as it would spur consumer spending growth.
Per The U.S. Federal Reserve’s recent data, Americans now owe a record $1.14 trillion in credit card debt as of the second quarter, highlighting the reliance on debt to make ends meet. Lower interest rates would lead to increased borrowings and transaction volumes, benefiting AXP’s top line. Loan growth has been moderating throughout the year for AXP. However, it is still expected to exit 2024 in double-digits.
AmEx generates the bulk of its revenues from non-interest income, primarily through discount revenues and card fees. However, 22.8% of its revenues comes from net interest income, which is directly influenced by changes in interest rates. Lower rates are likely to boost both merchant discount revenues and card loan balances, driving growth across its business.
AmEx’s Credit Quality Update
AXP’s net charge-off rate in August increased 10 basis points month over month to 2.2%, as outlined by the company’s expectations. However, AXP expects this metric to make a stable exit in 2024 at 2.1%.
Delinquency rates remained stable month over month at 1.3%. AmEx’s premium customer base comprising of high-income consumers who are less susceptible to economic headwinds, should support its strong credit quality in the future.
Growth Drivers
AXP’s results continue to be driven by increased card member spending, fee growth, rising interest income, and a growing Gen-Z and Millennial customer base. AXP expects its premium customer base to continue driving its card fee revenue growth, which came in at 15% in the second quarter of 2024. Improving retention levels and strong new card acquisitions poise this metric well for the future. The company expects its long-term revenue and earnings per share (EPS) growth to be 10% and mid-teens, respectively.
AXP’s U.S. Consumer Services segment is the fastest-growing segment of all. Its billed business growth, in large part, comes from Millennials and Gen-Z customers, rising 13% year over year in the second quarter. Moreover, this customer segment comprises a majority of new consumer account acquisitions globally.
Per AXP, Gen Z will be the largest customer segment by 2030, worldwide. Hence, an increasing focus on this segment should reap benefits for the company in the long run. Product innovation and strategic partnerships are also helping AXP broaden its reach and boost customer engagement.
AXP continues to return value to its shareholders through dividend payments. American Express bought back 7 million common shares in the second quarter of 2024. The company paid a per-share dividend worth 70 cents in the second quarter of 2024. Its dividend yield of 1.1% is higher than 0.5% of Mastercard and 0.8% of Visa.
Earnings Estimate Revision
Earnings estimates for AXP have moved north over the past 60 days, reflecting analysts’ optimism. AXP beat earnings estimates in three of the past four quarters, average surprise being 7.7%.
The Zacks Consensus Estimate for 2024 EPS is pegged at $13.13, suggesting year-over-year growth of 17.1%. The consensus mark for 2025 earnings is pinned at $14.9 per share, indicating a year-over-year increase of 13.5%. As earnings estimates increase, the stock is likely to follow suit.
Image Source: Zacks Investment Research
AXP Stock Valuation
From a valuation perspective, AXP is trading at a premium compared to the industry’s average. The company's shares are currently priced at a forward price/earnings ratio of 18.44X, which is higher than the industry’s average of 14.64X. Despite its current premium valuation, we believe the stock has significant upside potential, driven by its robust business model and recent positive developments.
Image Source: Zacks Investment Research
It is trading cheaper than its peers like Mastercard and Visa, which are trading at 30.66X and 24.36X, respectively.
Our Final Take: Grab It Now
American Express is well-positioned for growth with rising card fees and interest income, supported by a strong Millennial and Gen-Z customer base. Its credit quality remains stable, backed by high-income customers. Despite trading at a premium valuation, it remains cheaper than peers like Visa and Mastercard, offering significant upside potential. Additionally, increasing earnings estimates and shareholder initiatives like buybacks and dividends make AXP an attractive buy.
Image: Bigstock
AmEx Stock Trades Near 52-Week High: Is It Still Worth Buying?
American Express Company (AXP - Free Report) closed at $266.17 on Wednesday, just 2.3% shy of its 52-week high of $272.41. Its shares have gained 16.5% in the past three months, outperforming the industry and the S&P 500 Index. Over this time frame, the industry and the S&P 500 Index gained 1.2% and 3.8%, respectively. Due to its solid prospects, AXP even outperformed its peers Mastercard Incorporated (MA - Free Report) and Visa Inc. (V - Free Report) , which have gained 10.5% and 1.1%, respectively, in the same time frame.
AXP’s 3-Month Price Performance
Image Source: Zacks Investment Research
The proximity to its 52-week high underscores investors’ confidence and market optimism about this payments company’s prospects. Moreover, the stock is trading above its 50-day and 200-day moving averages, signaling strong upward momentum.
Now, let's see how recent developments might act in favor of AXP in the near term.
Fed-Funds Rate Cut Impact on AmEx
On Sept. 18, 2024, the Federal Reserve announced the long-awaited benchmark interest rate cut of 50 basis points. A rate cut is good news for a credit card company like American Express as it would spur consumer spending growth.
Per The U.S. Federal Reserve’s recent data, Americans now owe a record $1.14 trillion in credit card debt as of the second quarter, highlighting the reliance on debt to make ends meet. Lower interest rates would lead to increased borrowings and transaction volumes, benefiting AXP’s top line. Loan growth has been moderating throughout the year for AXP. However, it is still expected to exit 2024 in double-digits.
AmEx generates the bulk of its revenues from non-interest income, primarily through discount revenues and card fees. However, 22.8% of its revenues comes from net interest income, which is directly influenced by changes in interest rates. Lower rates are likely to boost both merchant discount revenues and card loan balances, driving growth across its business.
AmEx’s Credit Quality Update
AXP’s net charge-off rate in August increased 10 basis points month over month to 2.2%, as outlined by the company’s expectations. However, AXP expects this metric to make a stable exit in 2024 at 2.1%.
Delinquency rates remained stable month over month at 1.3%. AmEx’s premium customer base comprising of high-income consumers who are less susceptible to economic headwinds, should support its strong credit quality in the future.
Growth Drivers
AXP’s results continue to be driven by increased card member spending, fee growth, rising interest income, and a growing Gen-Z and Millennial customer base. AXP expects its premium customer base to continue driving its card fee revenue growth, which came in at 15% in the second quarter of 2024. Improving retention levels and strong new card acquisitions poise this metric well for the future. The company expects its long-term revenue and earnings per share (EPS) growth to be 10% and mid-teens, respectively.
AXP’s U.S. Consumer Services segment is the fastest-growing segment of all. Its billed business growth, in large part, comes from Millennials and Gen-Z customers, rising 13% year over year in the second quarter. Moreover, this customer segment comprises a majority of new consumer account acquisitions globally.
Per AXP, Gen Z will be the largest customer segment by 2030, worldwide. Hence, an increasing focus on this segment should reap benefits for the company in the long run. Product innovation and strategic partnerships are also helping AXP broaden its reach and boost customer engagement.
AXP continues to return value to its shareholders through dividend payments. American Express bought back 7 million common shares in the second quarter of 2024. The company paid a per-share dividend worth 70 cents in the second quarter of 2024. Its dividend yield of 1.1% is higher than 0.5% of Mastercard and 0.8% of Visa.
Earnings Estimate Revision
Earnings estimates for AXP have moved north over the past 60 days, reflecting analysts’ optimism. AXP beat earnings estimates in three of the past four quarters, average surprise being 7.7%.
The Zacks Consensus Estimate for 2024 EPS is pegged at $13.13, suggesting year-over-year growth of 17.1%. The consensus mark for 2025 earnings is pinned at $14.9 per share, indicating a year-over-year increase of 13.5%. As earnings estimates increase, the stock is likely to follow suit.
Image Source: Zacks Investment Research
AXP Stock Valuation
From a valuation perspective, AXP is trading at a premium compared to the industry’s average. The company's shares are currently priced at a forward price/earnings ratio of 18.44X, which is higher than the industry’s average of 14.64X. Despite its current premium valuation, we believe the stock has significant upside potential, driven by its robust business model and recent positive developments.
Image Source: Zacks Investment Research
It is trading cheaper than its peers like Mastercard and Visa, which are trading at 30.66X and 24.36X, respectively.
Our Final Take: Grab It Now
American Express is well-positioned for growth with rising card fees and interest income, supported by a strong Millennial and Gen-Z customer base. Its credit quality remains stable, backed by high-income customers. Despite trading at a premium valuation, it remains cheaper than peers like Visa and Mastercard, offering significant upside potential. Additionally, increasing earnings estimates and shareholder initiatives like buybacks and dividends make AXP an attractive buy.
American Express currently sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.