AXP - American Express' Plan Is Working But Valuation Makes It A Hold

2024-06-12 13:51:57 ET

Summary

• American Express' growth strategy is starting to bear fruit.
• The company aims to attract younger cardmembers without compromising credit quality, as they have higher spending growth and lifetime value.
• They plan to grow earnings faster than revenue through a combination of increased operational leverage and buybacks.
• The current valuation is reasonable but doesn't provide much margin of safety.

American Express ( AXP ) is a growth company. For those who haven't been following the story closely, this may seem a surprising or even absurd statement. But it's true. The company is currently promising and delivering growth above what long-time shareholders were used to. There seems to be ample evidence that AXP can execute this plan, and that ought to lead to market-beating returns for investors, but the valuation doesn't currently provide a large enough margin of safety for me to recommend a buy....

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