American Express Stock Dips. Time to Buy?

Core Viewpoint - Credit card stocks, particularly American Express, experienced a decline following President Trump's proposal to cap credit card interest rates at 10% for one year, raising concerns about potential impacts on profitability [1][2][3] Company Performance - American Express reported a strong third-quarter performance with revenue rising 11% year over year to a record $18.4 billion and earnings per share increasing 19% to $4.14 [7] - Discount revenue grew 7% year over year to $9.4 billion, while net card fee revenue surged 18% year over year to approximately $2.6 billion, and net interest income rose 12% year over year to $4.5 billion [8] - Card member spending growth accelerated to 9% year over year, supported by new account acquisitions and increased spending from existing members, with a low net write-off rate of 1.9% [9] Potential Impact of Policy Change - A proposed 10% cap on credit card interest rates could negatively affect American Express's business model, particularly its net interest income, which accounted for about one-fourth of its third-quarter revenue [4][6] - The cap may force credit card companies to lower credit limits for higher-risk borrowers, leading to reduced card member spending and lower discount revenue [5] - Investors are advised to monitor the situation closely, as the proposed policy could significantly impact credit card companies and banks that lend to credit card users [11]