Is It Too Late to Buy American Express Stock?

Core Viewpoint - American Express shares have surged to an all-time high with a 44% return this year, outperforming the S&P 500 index's 20% gain, driven by strong macroeconomic conditions and solid growth in earnings [1] Company Performance - American Express operates the world's fourth-largest payments network by transaction volume, distinguishing itself with a vertically integrated business model that includes credit and charge card issuance, lending options, insurance, merchant solutions, and travel services [2] - The company reported a 9% foreign-exchange-adjusted revenue growth and a 21% increase in adjusted earnings per share (EPS) in the second quarter [3] - The stock price rally is attributed to the company's ability to maintain high profitability despite a deceleration in top-line growth, achieved by increasing card fees and controlling operating expenses [4] Financial Metrics - A 20% increase in net interest income was noted compared to Q2 2023, alongside a 15% rise in net card fees, indicating stable card delinquencies below pre-pandemic levels [5] - Management revised full-year revenue growth expectations to between 9% and 11%, with an EPS target of $13.30 to$13.85, up from a prior estimate of $12.90 [6] Market Outlook - The Federal Reserve's recent interest rate cut is expected to boost demand for loans and credit services, creating a favorable environment for American Express [7][8] - The stock is currently trading at about 20 times management's full-year EPS guidance, which is considered a bargain compared to peers like Visa and Mastercard, trading at P/E ratios of 29 and 35 respectively [9][11] Global Expansion - International card services contribute around 20% to American Express's global payments network and have seen accelerating revenue, presenting opportunities for global expansion and market share consolidation [10] Investment Perspective - American Express is viewed as a strong candidate for investor portfolios, with expectations for continued upside into 2025 and beyond, suggesting strategies like dollar-cost averaging to mitigate timing risk [12]