American Express Stock Soars -- Why It Could Go Even Higher.

Core Viewpoint - American Express has reported strong third-quarter results, leading to a reassessment of its market valuation, with potential for its stock to catch up to peers like Visa and Mastercard [2][3][14] Financial Performance - Third-quarter revenue increased by 11% year over year to $18.4 billion, while earnings per share rose by 19% to $4.14 [4] - Card member spending growth accelerated to 9%, up from 7% in the previous quarter [4] - Management raised its full-year guidance, expecting revenue growth of 9% to 10% and earnings per share between $15.20 and $15.50 [4] Revenue Drivers - Cardmember fee income grew by 18% year over year, driven by the adoption of premium cards that offer travel and lifestyle perks [5] - Net interest income also increased by 12% [5] Credit Metrics - The provision for credit losses decreased year over year, indicating a lower reserve build [6] - The net write-off rate remained stable at 1.9%, suggesting disciplined underwriting practices [6] Competitive Advantage - American Express differentiates itself by offering premium products and has recently refreshed its U.S. consumer and business Platinum cards, resulting in doubled account acquisitions post-refresh [7] - Premium cardmembers spend an average of three times more than those on other networks, highlighting the company's strong customer base [8] Valuation Comparison - Despite recent stock gains, American Express still trades at a lower price-to-earnings multiple compared to Visa and Mastercard, which are valued higher due to their capital-light models [9] - American Express's integrated model allows it to capture more profit per dollar spent and maintain better control over customer experience [10] Future Outlook - If American Express can demonstrate improved customer experience and engagement while maintaining strong credit metrics, it may narrow the valuation gap with its peers [11] - The stock's current price-to-earnings multiple of about 23 is attractive compared to Visa and Mastercard's multiples of 34 and 38 [13] - Continued momentum could lead to a reassessment of American Express's valuation, reflecting its competitive advantages [14]