American Express Stock Outperforms Market with 62% Surge
Global integrated payments leader American Express Company (AXP) has seen its shares rise an impressive 62.1% this year. This performance surpasses both the financial services industry and the S&P 500 Index, which have increased by 20.1% and 27.8%, respectively. The company’s robust growth also outpaces major competitors, including Mastercard Incorporated (MA) and Visa Inc. (V).
On Monday, AmEx shares closed at $303.57, only 1.4% shy of its 52-week high of $307.82. This closeness to its peak reflects strong investor confidence in the company’s ongoing potential in the payments industry.
2024 AXP Stock Performance Overview
Image Source: Zacks Investment Research
AXP: Building on Strong Customer Loyalty
American Express benefits from a loyal customer base, high card acquisition rates, and strong retention. The company expects that its premium cardholders will drive ongoing growth in card fee revenue.
To attract younger consumers, particularly Gen Z and millennials, AmEx has stepped up its marketing efforts. Although these demographics usually spend less, the company views this as a long-term investment. By nurturing these relationships now, AmEx aims to foster customer loyalty that lasts for years.
A significant focus of its investment strategy is on marketing initiatives to support sustainable growth. This approach positions the company for success while enhancing investor confidence.
Resilience in Tough Markets
Although American Express has fewer cardholders than some larger rivals, it concentrates on an affluent and loyal segment that tends to maintain spending even in difficult times. This strategy secures AXP’s continued performance in challenging market conditions. The company also benefits from consistent revenues through annual card fees and a compelling rewards program for its members.
AXP Stock Valuation Insights
Due to its strong performance and promising outlook, American Express’s shares are currently trading at a forward P/E ratio of 20.12X. This figure is above its five-year median of 16.31X and the industry’s average of 16.92X.
Notably, AXP shares are priced lower than competitors like Mastercard and Visa, which are at 32.73X and 27.40X, respectively.
Image Source: Zacks Investment Research
Challenges Ahead for AXP
However, escalating costs related to rewards and card member services could hinder profit growth. Overall expenses rose by 9% year over year in the third quarter, reaching $12.1 billion.
There are also concerns regarding credit risk, with provisions for losses increasing by 10% to $1.4 billion in the third quarter, impacting the company’s financials.
Earnings Forecast and Performance History
In the past month, AXP faced two downward revisions for its 2024 earnings estimates compared to one upward revision. Similarly, 2025 earnings experienced two downward adjustments with no upward revisions. AmEx managed to exceed earnings estimates in three of the last four quarters, with an average positive surprise of 6.5%.
American Express Stock Analysis
Explore American Express price and EPS surprises
Final Thoughts: AXP Worth Holding for Now
American Express stands well-positioned for long-term growth, fueled by its expanding Millennial and Gen Z customer base. Despite its ability to endure challenging market climates thanks to loyal customers, its high valuation relative to the industry, along with ongoing challenges, may cap short-term potential.
For long-term investors, AXP’s prospects may warrant a continued investment. However, potential buyers should exercise caution regarding its elevated price and rising costs.
Currently, American Express holds a Zacks Rank #3 (Hold). You can view the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Free Stock Analysis Report: Mastercard Incorporated (MA)
Free Stock Analysis Report: Visa Inc. (V)
Free Stock Analysis Report: American Express Company (AXP)
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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