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Can American Express Stock Charge Ahead in 2025 After Stellar Run?
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Shares of the global integrated payments company, American Express Company (AXP - Free Report) have been on an impressive rally. In 2024, the stock surged 58.5%, significantly outperforming major payment giants like Visa Inc.(V - Free Report) and Mastercard Incorporated (MA - Free Report) . By comparison, the broader industry and the S&P 500 Index posted gains of 11.1% and 24.4%, respectively, during the same period.
So far this year, American Express has gained nearly 2%. On Tuesday, its shares closed at $302.02, just 1.9% shy of its 52-week high of $307.82. This proximity to a yearly peak reflects strong investor confidence and heightened market optimism about the company's growth prospects within the payments landscape. It posted impressive results in the first three quarters of 2024, beating bottom-line estimates in each quarter.
Why AXP’s Rally Can Continue
AmEx continues to thrive by leveraging its dual role as a bank and credit card specialist. Strong credit performance and operating leverage are fueling its profit growth. A steady increase in cardmember spending bolsters its figures while its lending operations gain traction, offering diversification that helps the company navigate changing economic environments.
Its loyal customer base, robust card acquisition rates and impressive retention levels are key drivers of its success. AmEx expects its premium clientele to remain a major contributor to card fee revenue growth. Its strong cash-generating ability will continue supporting business investments and shareholder returns.
Strategically, AmEx has intensified its marketing efforts toward younger generations, particularly Gen Z and millennials. Although these groups typically spend less than older cohorts, AmEx views this as a long-term investment. By engaging younger consumers now, the company aims to foster lifelong loyalty, ensuring sustained growth in the future. This approach makes it an appealing choice for long-term investors.
With its expanding customer base, AmEx is well-positioned to continue boosting earnings and revenue.
Earnings Estimate Revisions & Surprise History
AXP has seen two upward revisions in its 2024 earnings estimates over the past 30 days, with no downward adjustments. For 2025, one upward revision has been noted, with no declines. The Zacks Consensus Estimate for 2024 earnings indicates a 19.6% year-over-year increase, while 2025 earnings are expected to grow by 13.2%. Revenue estimates for 2024 and 2025 indicate year-over-year growth of 9% and 8.5%, respectively.
Additionally, AmEx has surpassed earnings estimates in three of the past four quarters, with only one miss, delivering an average surprise of 6.5%.
American Express Company Stock Price and EPS Surprise
From a valuation perspective, American Express appears relatively expensive, which may constrain short-term gains and make it less appealing compared to other investment opportunities. Going by its price/earnings ratio, the company is trading at a forward earnings multiple of 19.85X, higher than its five-year median of 16.42X and the industry average of 15.98X.
Image Source: Zacks Investment Research
Continuously rising costs, rewards expenses and cardmember services pose challenges to American Express' profit growth. In 2021, total expenses surged 22% to $33.1 billion, followed by a 24% increase in 2022, driven by higher costs for rewards, business development and services. Expenses rose by 10% in 2023 and climbed another 5% in the first nine months of 2024.
The company’s exposure to credit risk also weighs on its profitability. It makes provisions for credit losses, which have been increasing. In the first three quarters of 2024, these provisions grew 12% year-over-year, reaching $3.9 billion. The broader economic environment is in a transitional phase, with inflation cooling and savings accumulated during the COVID-19 era shrinking. How these factors will influence consumer spending trends in the coming months remains uncertain.
While AmEx's growing operations, cardmember spending and sustainable growth initiatives make it an attractive stock to retain for current investors, prospective buyers may consider waiting for a more favorable entry point due to the stock's elevated valuation. Also, investors should keep an eye on its rising costs, any regulatory changes in the coming days, and consumer spending trends, as these have a significant influence on AXP's performance.
Image: Bigstock
Can American Express Stock Charge Ahead in 2025 After Stellar Run?
Shares of the global integrated payments company, American Express Company (AXP - Free Report) have been on an impressive rally. In 2024, the stock surged 58.5%, significantly outperforming major payment giants like Visa Inc.(V - Free Report) and Mastercard Incorporated (MA - Free Report) . By comparison, the broader industry and the S&P 500 Index posted gains of 11.1% and 24.4%, respectively, during the same period.
2024 Stock Price Performance – AXP, V, MA, Industry & S&P 500
So far this year, American Express has gained nearly 2%. On Tuesday, its shares closed at $302.02, just 1.9% shy of its 52-week high of $307.82. This proximity to a yearly peak reflects strong investor confidence and heightened market optimism about the company's growth prospects within the payments landscape. It posted impressive results in the first three quarters of 2024, beating bottom-line estimates in each quarter.
Why AXP’s Rally Can Continue
AmEx continues to thrive by leveraging its dual role as a bank and credit card specialist. Strong credit performance and operating leverage are fueling its profit growth. A steady increase in cardmember spending bolsters its figures while its lending operations gain traction, offering diversification that helps the company navigate changing economic environments.
Its loyal customer base, robust card acquisition rates and impressive retention levels are key drivers of its success. AmEx expects its premium clientele to remain a major contributor to card fee revenue growth. Its strong cash-generating ability will continue supporting business investments and shareholder returns.
Strategically, AmEx has intensified its marketing efforts toward younger generations, particularly Gen Z and millennials. Although these groups typically spend less than older cohorts, AmEx views this as a long-term investment. By engaging younger consumers now, the company aims to foster lifelong loyalty, ensuring sustained growth in the future. This approach makes it an appealing choice for long-term investors.
With its expanding customer base, AmEx is well-positioned to continue boosting earnings and revenue.
Earnings Estimate Revisions & Surprise History
AXP has seen two upward revisions in its 2024 earnings estimates over the past 30 days, with no downward adjustments. For 2025, one upward revision has been noted, with no declines. The Zacks Consensus Estimate for 2024 earnings indicates a 19.6% year-over-year increase, while 2025 earnings are expected to grow by 13.2%. Revenue estimates for 2024 and 2025 indicate year-over-year growth of 9% and 8.5%, respectively.
Additionally, AmEx has surpassed earnings estimates in three of the past four quarters, with only one miss, delivering an average surprise of 6.5%.
American Express Company Stock Price and EPS Surprise
American Express Company price-eps-surprise | American Express Company Quote
But Don’t Rush to Buy AXP Stock Now
From a valuation perspective, American Express appears relatively expensive, which may constrain short-term gains and make it less appealing compared to other investment opportunities. Going by its price/earnings ratio, the company is trading at a forward earnings multiple of 19.85X, higher than its five-year median of 16.42X and the industry average of 15.98X.
Continuously rising costs, rewards expenses and cardmember services pose challenges to American Express' profit growth. In 2021, total expenses surged 22% to $33.1 billion, followed by a 24% increase in 2022, driven by higher costs for rewards, business development and services. Expenses rose by 10% in 2023 and climbed another 5% in the first nine months of 2024.
The company’s exposure to credit risk also weighs on its profitability. It makes provisions for credit losses, which have been increasing. In the first three quarters of 2024, these provisions grew 12% year-over-year, reaching $3.9 billion. The broader economic environment is in a transitional phase, with inflation cooling and savings accumulated during the COVID-19 era shrinking. How these factors will influence consumer spending trends in the coming months remains uncertain.
While AmEx's growing operations, cardmember spending and sustainable growth initiatives make it an attractive stock to retain for current investors, prospective buyers may consider waiting for a more favorable entry point due to the stock's elevated valuation. Also, investors should keep an eye on its rising costs, any regulatory changes in the coming days, and consumer spending trends, as these have a significant influence on AXP's performance.
With American Express currently carrying a Zacks Rank #3 (Hold), new investors should consider staying on the sidelines for now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.