HomeMost Popular Analyzing the Trajectory of American Express Stock Deciphering the Future Path of American...

Analyzing the Trajectory of American Express Stock Deciphering the Future Path of American Express Stock After a Stellar 21% YTD Surge

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American Express Stock Overview

American Expressโ€™ stockย (NYSE: AXP) has surged 21% YTD, significantly outpacing the S&P500, which rose by 10% during the same period. Trading at $228 per share, the stock currently stands 11% above its fair value of $205 according to Trefisโ€™ estimations for American Expressโ€™ valuation.ย 

A History of Market Outperformance

By the numbers, AXP stock has shown robust gains of 90% since early January 2021, rising from $120 to around $230 presently, while the S&P 500 managed a 40% increase over the same timeframe. Impressively, American Express has consistently outperformed the broader market for the past 3 years, with returns of 35% in 2021, -10% in 2022, and 27% in 2023. In contrast, the S&P 500 yielded returns of 27% in 2021, -19% in 2022, and 24% in 2023. Surpassing the S&P 500 continuously, particularly in volatile times, has proven challenging for many individual stocks in recent years, including financial stalwarts like JPM, V, and MA, as well as tech giants such as GOOG, TSLA, and MSFT. However, the Trefisย High Quality (HQ) Portfolio, comprising 30 equities, has managed toย surpass the S&P 500 each year. Curious about the secret sauce? The HQ Portfolioโ€™s collective returns outshine the benchmark index, offering superior performance with less risk, as evidenced by its performance metrics.

Future Projections and Market Speculations

Given the prevailing macroeconomic uncertainty characterized by soaring oil prices and elevated interest rates, investors are speculating whether AXP could witness a significant upswing.

In the fourth quarter of 2023, the credit card giant fell short of street expectations. Although it reported total revenues of $15.8 billion โ€“ an 11% increase year-over-year (y-o-y), driven by a 7% growth in non-interest revenues and a 31% surge in net interest income (NII), the company saw provisions for credit losses rise unfavorably from $1 billion to $1.4 billion. As a result, adjusted net income rose by 23% y-o-y to $1.9 billion.

For the full fiscal year 2023, AXP witnessed a 14% y-o-y revenue growth to $60.5 billion, supported by a 10% uptick in noninterest revenues and a 33% jump in NII. Despite provisions more than doubling to $4.9 billion, a decrease in total expenses as a percentage of revenues from 77.8% to 74.5% helped boost adjusted net income by 12% y-o-y to $8.25 billion.

Looking ahead, American Expressโ€™ revenues are projected to reach $66.25 billion in FY2024, with adjusted net income estimated to maintain a similar level as the previous year, resulting in an adjusted net income of $9.1 billion. This, combined with an anticipated annual GAAP EPS of $12.83 and a P/E ratio just under 16x, is anticipated to lead to a valuation of $205.

Returns Apr 2024
MTD [1]
YTD [1]
Total [2]
AXP Return 0% 21% 207%
S&P 500 Return 0% 10% 134%
Trefisย Reinforced Value Portfolio -1% 6% 649%

[1] Returns as of 4/2/2024
[2] Cumulative total returns since the end of 2016

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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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