American Express Company (AXP) is a leading financial services company that provides charge card and credit payment products, and travel-related services worldwide. The company operates through three segments: Global Consumer Services Group, Global Commercial Services, and Global Merchant and Network Services.
AXP has witnessed a steady recovery in overall consumer spending volumes since lows hot in mid-April. It has reported positive year-over-year growth in non-T&E spending in its third quarter earnings release.
Although 2020 has been a rough year for the company due to lower loan volumes and lower travel-related card spending, AXP stock is expected to move higher in 2021 pushed along by a digital-payments trend. Moreover, large scale coronavirus vaccine distribution should speed economic global re-engagement, serving as a catalyst for the stock’s rebound.
The company’s increasing customer acquisition and robust liquidity position have allowed it to gain 54.6% over the past nine months. This impressive performance combined with several other factors has helped AXP earn a “Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates AXP:
Trade Grade: B
AXP is currently trading above its 50-day and 200-day moving averages of $110.92 and $98.75, respectively. This indicates that the stock is in an uptrend. The stock has gained 16.3% over the past three months, reflecting short-term bullishness.
AXP’s non-interest revenue increased 18.8% sequentially to $6.88 billion in the third quarter ended September 30, 2020. The increase in revenue was primarily attributable to a steady recovery in card member spending. Its net income increased 341.2% sequentially to $1.05 billion, while EPS grew 351.7% to $1.31 over this period.
On November 16, AXP announced the enhancement of its Early Pay supply chain solution that provides large companies the ability to use digital payments and thereby maximize their cash flow. This investment will enable the company to offer its customers unique B2B payment solutions and, thereby, grow its business.
On October 26, AXP and Uber, Inc. (UBER) announced the expansion of their partnership to introduce exclusive offers to U.S. Consumer Platinum, Gold, and Green Card Members. This will provide value to AXP’s card members and likely drive business growth.
Buy & Hold Grade: B
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, AXP is well positioned. The stock is currently trading 15.3% below its 52-week high of $138.13, which it hit on January 24.
The company’s net revenue grew at a CAGR of 0.6% over the past five years. This can be attributed to its increasing investments to enhance its products and its expansion of commercial offerings.
Peer Grade: D
AXP is currently ranked #17 of 47 stocks in the Consumer Financial Services industry. Other popular stocks in this industry are Visa, Inc. (V), PayPal Holdings, Inc. (PYPL) and Intuit, Inc. (INTU)
While PYPL and INTU outran AXP, gaining 180.9% and 88.3% over the past nine months, respectively, V returned 40.2% over this period.
Industry Rank: B
The Consumer Financial Services industry is ranked #26 of the 123 StockNews.com industries. The companies in this industry provide charge and credit card products, credit services, payments and expense management products and services, mortgage loans, tax accounting, and other consumer-related finance products.
The COVID-19 outbreak has driven big changes in how consumers think about payments. Digital-payment services are facing a surge in demand as efforts to dodge the virus have resulted in housebound shoppers making purchases online more than ever before. With banks modernizing their payment systems, this digital revolution could be the next big thing for this industry.
Overall POWR Rating: B (Buy)
AXP is rated “Buy” due to its impressive financials, short- and long-term bullishness, and underlying industry strength, as determined by the four components of our overall POWR Rating.
AXP is well positioned to appreciate in the coming months despite gaining 54.6% over the past nine months. The coronavirus vaccine deployment amid growing concerns surrounding a new strain of the COVID-19 could drive a broader recovery in global card spending, benefiting the company’s stock. Also, the increased use of electronic modes of payment and greater adoption of digital and contactless solutions could bode well for AXP in the coming months.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is positive for AXP. It has an average broker rating of 1.76, indicating favorable analyst sentiment. The consensus EPS estimate of $6.77 for the next year represents a 104.5% improvement year-over-year. The consensus revenue estimate of $40.21 billion for the next year represents an 11.1% increase from the same period last year.
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AXP shares were trading at $116.58 per share on Thursday morning, down $0.37 (-0.32%). Year-to-date, AXP has declined -4.68%, versus a 16.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More…
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