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Should You Buy American Express Stock Before 2025 Kicks Off?
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Global integrated payments company American Express Company (AXP - Free Report) shares have surged 62.1% so far this year, outperforming the industry and the S&P 500 Index. Over this time frame, the industry and the S&P 500 Index have gained 20.1% and 27.8%, respectively. Due to its solid prospects, AmEx has also outperformed its peers like Mastercard Incorporated (MA - Free Report) and Visa Inc. (V - Free Report) .
AmEx closed at $303.57 on Monday, just 1.4% below its 52-week high of $307.82. This proximity to its 52-week high highlights strong investor confidence and growing market optimism about the company’s future prospects in the industry.
2024 AXP Stock Price Performance Comparison
Image Source: Zacks Investment Research
AXP Building Sustainable Momentum
American Express is riding on the strength of its loyal customer base, robust card acquisition rates and impressive retention levels. The company anticipates its premium clientele to remain a key driver of card fee revenue growth.
AmEx has strategically increased its marketing efforts toward younger consumers, targeting Gen Z and millennials. While these generations typically spend less than older cohorts, the company sees this as a long-term play. By investing now, AmEx aims to build lifelong customer loyalty, securing sustained growth for decades to come.
A significant portion of its investments will focus on marketing initiatives, reinforcing its commitment to long-term, sustainable expansion. This strategy positions the company for continued success, bolstering confidence in its ongoing rally.
AXP Can Thrive in Challenging Conditions
While American Express has a smaller cardholder base compared to some of its larger competitors, it focuses on an affluent and loyal customer group with higher spending power. This resilient clientele tends to maintain their spending even during turbulent periods, ensuring AXP's continued success in tough market conditions. Additionally, the firm generates steady revenues through annual fees on many of its cards, complemented by a valuable rewards program that appeals to its fee-paying members.
AXP Stock Valuation
Due to its impressive performance and future prospects, AmEx’s valuation has risen. The company's shares are currently priced at a forward price/earnings ratio of 20.12X, higher than its five-year median of 16.31X and the industry’s average of 16.92X.
Nevertheless, it is trading cheaper than its peers like Mastercard and Visa, which are trading at 32.73X and 27.40X, respectively.
Image Source: Zacks Investment Research
AXP’s Hurdles
However, continuously rising costs, reward expenses and card member services can affect its profit growth level. Total expenses increased 9% year over year in the third quarter to $12.1 billion.
It has an exposure to credit risk and makes provisions for losses, which affects its bottom line. In the third quarter, these provisions increased by 10% year-over-year, reaching $1.4 billion.
Earnings Estimate Revisions & Surprise History
AXP witnessed two downward estimate revisions for 2024 earnings in the past 30 days against one upward movement. Further, its 2025 earnings saw two downward revisions against no upward movement during this time. It beat earnings estimates in three of the past four quarters and missed once, with the average surprise being 6.5%.
American Express Company Stock Price and EPS Surprise
American Express is well-positioned for long-term growth, driven by a growing Millennial and Gen-Z customer base. Its affluent and loyal customers help the company weather tough market conditions. However, its premium valuation compared to the industry, along with ongoing challenges, could limit its short-term potential.
For long-term investors, AXP's strong prospects may justify holding onto the stock. However, potential investors may want to be cautious of its high price and rising expenses.
Image: Bigstock
Should You Buy American Express Stock Before 2025 Kicks Off?
Global integrated payments company American Express Company (AXP - Free Report) shares have surged 62.1% so far this year, outperforming the industry and the S&P 500 Index. Over this time frame, the industry and the S&P 500 Index have gained 20.1% and 27.8%, respectively. Due to its solid prospects, AmEx has also outperformed its peers like Mastercard Incorporated (MA - Free Report) and Visa Inc. (V - Free Report) .
AmEx closed at $303.57 on Monday, just 1.4% below its 52-week high of $307.82. This proximity to its 52-week high highlights strong investor confidence and growing market optimism about the company’s future prospects in the industry.
2024 AXP Stock Price Performance Comparison
AXP Building Sustainable Momentum
American Express is riding on the strength of its loyal customer base, robust card acquisition rates and impressive retention levels. The company anticipates its premium clientele to remain a key driver of card fee revenue growth.
AmEx has strategically increased its marketing efforts toward younger consumers, targeting Gen Z and millennials. While these generations typically spend less than older cohorts, the company sees this as a long-term play. By investing now, AmEx aims to build lifelong customer loyalty, securing sustained growth for decades to come.
A significant portion of its investments will focus on marketing initiatives, reinforcing its commitment to long-term, sustainable expansion. This strategy positions the company for continued success, bolstering confidence in its ongoing rally.
AXP Can Thrive in Challenging Conditions
While American Express has a smaller cardholder base compared to some of its larger competitors, it focuses on an affluent and loyal customer group with higher spending power. This resilient clientele tends to maintain their spending even during turbulent periods, ensuring AXP's continued success in tough market conditions. Additionally, the firm generates steady revenues through annual fees on many of its cards, complemented by a valuable rewards program that appeals to its fee-paying members.
AXP Stock Valuation
Due to its impressive performance and future prospects, AmEx’s valuation has risen. The company's shares are currently priced at a forward price/earnings ratio of 20.12X, higher than its five-year median of 16.31X and the industry’s average of 16.92X.
Nevertheless, it is trading cheaper than its peers like Mastercard and Visa, which are trading at 32.73X and 27.40X, respectively.
AXP’s Hurdles
However, continuously rising costs, reward expenses and card member services can affect its profit growth level. Total expenses increased 9% year over year in the third quarter to $12.1 billion.
It has an exposure to credit risk and makes provisions for losses, which affects its bottom line. In the third quarter, these provisions increased by 10% year-over-year, reaching $1.4 billion.
Earnings Estimate Revisions & Surprise History
AXP witnessed two downward estimate revisions for 2024 earnings in the past 30 days against one upward movement. Further, its 2025 earnings saw two downward revisions against no upward movement during this time. It beat earnings estimates in three of the past four quarters and missed once, with the average surprise being 6.5%.
American Express Company Stock Price and EPS Surprise
American Express Company price-eps-surprise | American Express Company Quote
Final Thoughts: Hold AXP for Now
American Express is well-positioned for long-term growth, driven by a growing Millennial and Gen-Z customer base. Its affluent and loyal customers help the company weather tough market conditions. However, its premium valuation compared to the industry, along with ongoing challenges, could limit its short-term potential.
For long-term investors, AXP's strong prospects may justify holding onto the stock. However, potential investors may want to be cautious of its high price and rising expenses.
American Express currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.