Deep Dive Analysis: Is American Express (AXP) a Worthy Long-Term Investment?

- 6月 04, 2025

Deep Dive Analysis: Is American Express (AXP) a Worthy Long-Term Investment?

This comprehensive analysis evaluates American Express (AXP) as a long-term investment opportunity, focusing on its financial performance from 2015 to 2024, 2024 business results, 2025 outlook, competitive position, and valuation. Adopting a value-oriented perspective inspired by Warren Buffett, the report determines whether AXP is worth buying at its current price of $294.05 (as of May 30, 2025), why, and identifies a reasonable purchase price.

Financial Performance (2015–2024)

American Express has demonstrated consistent growth over the past decade, with some volatility due to external factors like the 2020 pandemic. The following table summarizes key financial metrics from MacroTrends:

Revenue Growth: Revenue grew from $34.4 billion in 2015 to $65.9 billion in 2024 (reported as $65,949 million in 2024 financials), a compound annual growth rate (CAGR) of approximately 7.5%. Growth was steady, with a dip in 2020 due to reduced consumer spending during the pandemic, followed by a strong recovery.
Net Income Growth: Net income increased from $5.1 billion to $10.1 billion, a CAGR of about 8.5%. Notable declines occurred in 2017 (due to tax reform charges) and 2020, but recent years show robust recovery.
Earnings Per Share (EPS): EPS rose from $5.05 to $14.01, reflecting share buybacks and improved profitability.
Key Insight: AXP’s consistent revenue and earnings growth, despite occasional setbacks, highlight its resilience and ability to capitalize on consumer spending trends.

2024 Business Performance

In 2024, AXP achieved record financial results, as reported by American Express Investor Relations:

Revenue (Net of Interest Expense): $65.9 billion, up 9% from 2023 (10% FX-adjusted).
Net Income: $10.1 billion, up 21% from $8.4 billion in 2023.
EPS (Diluted): $14.01, up 25% from $11.21, with adjusted EPS (excluding a $0.66 gain from the Accertify sale) at $13.35, up 19%.
Billed Business: $1.55 trillion, up 6% (7% FX-adjusted), driven by increased cardmember spending.
Provisions for Credit Losses: $5.2 billion, with a net write-off rate of 2.0% (up from 1.8% in 2023), indicating manageable credit risk.
Q4 2024 Highlights:
- Revenue: $17.2 billion, up 9% (10% FX-adjusted).
- Net Income: $2.17 billion, up 12%.
- EPS: $3.04, up 16%.

Key Insight: AXP’s 2024 performance reflects strong growth in revenue, earnings, and cardmember spending, underpinned by its focus on premium customers and digital innovation.

2025 Outlook

AXP provided guidance for 2025, expecting:

Revenue Growth: 8% to 10%.
EPS: $15.00 to $15.50.

This outlook suggests continued growth, driven by increasing cardmember spending, global merchant acceptance, and investments in technology and loyalty programs. The company’s focus on younger customers and emerging markets further supports its growth trajectory, as noted in Spocket.

Key Insight: The 2025 guidance indicates sustained momentum, aligning with AXP’s historical growth trends and market expectations.

Business Model and Competitive Advantages

American Express operates a closed-loop payment network, issuing cards, processing transactions, and maintaining direct relationships with cardholders and merchants. Key strengths include:

Closed-Loop Network: Unlike Visa and MasterCard, AXP’s integrated model provides control over transaction data, enabling tailored services and multiple revenue streams (interest, annual fees, merchant fees), as highlighted by Investopedia.
Premium Brand: AXP targets affluent customers with high-fee cards (e.g., Platinum, Centurion), leading to higher transaction volumes and margins. Its brand is synonymous with trust and exclusivity, per Hivelr.
Market Share: AXP holds a smaller global card base than Visa and MasterCard but has 99% merchant acceptance in the U.S. and is expanding globally, per Investopedia.
Diversified Revenue: Revenue from interest, fees, and merchant transactions provides stability across economic cycles.
Innovation: Investments in digital payments, expense management tools, and partnerships enhance competitiveness against fintech disruptors, as noted in Kavout.

Key Insight: AXP’s closed-loop model, premium positioning, and technological investments create a strong competitive moat, ensuring long-term profitability.

Current Valuation

Stock Price: $294.05 (as of May 30, 2025, per MacroTrends).
P/E Ratio: Using 2024 EPS of $14.01, the P/E ratio is $294.05 / $14.01 ≈ 20.16, slightly above the 10-year historical average of 17.66–17.97, per MacroTrends and FullRatio.
Forward P/E Ratio: Using 2025 EPS guidance of $15.25 (midpoint), the forward P/E is $294.05 / $15.25 ≈ 19.26.
Dividend Yield: 1.12% ($3.28 annually), with a payout ratio of 20.4%, indicating room for future increases, per MacroTrends.
Price-to-Book (P/B) Ratio: Book value per share is approximately $40 (based on recent financials), so P/B ≈ $294.05 / $40 ≈ 7.35, higher than industry peers but justified by AXP’s premium brand.
Analyst Price Targets: Average target of $295.10, ranging from $240 to $371, with a consensus rating of “Hold” to “Outperform,” per Benzinga.

Key Insight: AXP’s current P/E of 20.16 is slightly above historical averages but reasonable given its 8–10% growth outlook. The forward P/E of 19.26 and modest dividend yield make it attractive for long-term investors.

Growth Prospects

Consumer Spending: AXP benefits from rising spending among affluent and younger customers, particularly Millennials and Gen Z, as noted in Kavout.
Global Expansion: Increasing merchant acceptance in emerging markets supports billed business growth.
Digital Innovation: Investments in mobile payments and expense management tools position AXP to compete with fintechs.
Loyalty Programs: Strong rewards programs drive cardmember retention and spending.

Key Insight: AXP’s focus on premium segments, global expansion, and technology ensures sustained growth potential.

Risks

Economic Downturns: Reduced consumer spending could impact revenue, though AXP’s affluent customer base mitigates this risk.
Competition: Fintechs (e.g., PayPal, SoFi) and traditional banks (e.g., JPMorgan Chase) challenge market share.
Regulatory Risks: Changes in interchange fees or data privacy laws could affect profitability.
Credit Risk: Higher write-off rates (2.0% in 2024) could rise in a recession, though AXP’s risk management is robust.

Key Insight: While risks exist, AXP’s strong balance sheet and premium focus provide resilience.

Warren Buffett’s Perspective

Buffett’s Berkshire Hathaway owns approximately 20% of AXP, a stake held since 1964, reflecting long-term confidence, per Investing.com. Buffett values companies with strong moats and predictable earnings. AXP’s closed-loop network, premium brand, and consistent growth align with his criteria. However, the current P/E of 20.16 is higher than historical averages, which might give Buffett pause. His continued holding suggests he sees value at current levels, especially given AXP’s growth prospects.

Is AXP Worth Buying for Long-Term Investment?

Yes, AXP is worth buying for long-term investment due to:

Consistent Growth: 7.5% revenue CAGR and 8.5% net income CAGR over the past decade.
Strong 2024 Performance: 9% revenue growth, 25% EPS growth, and record billed business.
2025 Outlook: 8–10% revenue growth and $15.00–$15.50 EPS guidance.
Competitive Moat: Closed-loop network, premium brand, and diversified revenue streams.
Reasonable Valuation: Forward P/E of 19.26 is attractive relative to growth.
Dividend Stability: 1.12% yield with a history of increases.

Reasonable Buy Price

Current Price: $294.05.
Historical P/E Approach: Using the 10-year average P/E of 17.66 and 2025 EPS of $15.25, a reasonable price is $15.25 * 17.66 ≈ $269.70.
Analyst-Based Approach: Average price target of $295.10 suggests the stock is fairly valued, with potential upside to $371.
Recommended Buy Range: Below $300, ideally $270–$280, for a margin of safety. The current price of $294.05 is acceptable for long-term investors given AXP’s growth trajectory.

Recommendation

AXP is a compelling long-term investment at its current price of $294.05. Its strong fundamentals, competitive advantages, and growth prospects outweigh risks. Investors seeking a balance of growth and stability should consider buying below $300, with $270–$280 as an ideal entry point. To mitigate risk, avoid allocating a large portion of your portfolio to a single stock and consider dollar-cost averaging.

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