November 9, 2023, $152.37
Business Overview:
- Founded in 1850, American Express Co. is a financial services corporation that provides charge and credit card products and travel-related services worldwide. The company operates through the Global Consumer Services Group, Global Commercial Services, and Global Merchant and Network Services.
Maverick Guidance:
- Short-term stock buy/sell recommendation: SELL after the recent bounce
- Long-term stock recommendation: AVOID UNTIL AXP DROPS TO ACCUMULATION ZONE
- 10-YEAR Average Annual Return = +8.08% to November 8, 2023 (3RD Quartile)
- My Oct 22 Maverick Guidance worked out: “Wall Street is presently overly negative, promoting the impact its doom and gloom economic forecast will have on business and consumer spending and card use. This is a time for Mavericks to buy on spike bottoms.” But this is a time to avoid further purchases until AXP hits LT ACCUMULATION ZONE.
- Nov 9 Maverick Guidance is to AVOID. Economic contraction is a serious concern.
Consideration for Maverick Portfolio:
- Appropriate for risk profile score of 16-21. The Moderately Conservative Investor aims for a balanced approach that combines growth and stability. The Maverick CAUTIOUS GROWTH portfolio is designed to achieve modest medium-term total returns.
- Too many internal weaknesses and external threats and a weak 10-year total return performance (i.e., Insufficient growth) keep AXP from being an appropriate MODERATE or AGGRESSIVE GROWTH candidate, regardless of AXP being a Warren Buffett favorite.
Market Guidance:
- Consensus Analyst Ratings— MarketBeat = Moderate Buy, TipRanks = Moderate Buy.
- 15 Wall Street analysts have offered 12-month price targets for AXP in the last 3 months. There are 8 Buy, 7 Hold, and zero Sell. (from TipRanks)
- Based on 12 Wall Street analysts offering 12-month price targets for American Express in the last 3 months. The average price target is $176.00, with a high forecast of $201.00 and a low forecast of $148.00. The average price target represents a 15.5% change from the last price of $152.37. (from TipRanks)
- Dividend Yield: $0.60 per share paid quarterly to yield 1.52%. Dividend growth for over 15 years. (from TipRanks)
- Technical Analysis:
Investing.com = Daily: BUY Weekly: SELL
TipRanks.com = Daily: BUY Weekly: NEUTRAL
Value Line Guidance: (all data from VL) (Nov. 3 Report)
- Company Financial Strength Rating: A++
Share Price Safety, Market Timing, Technical Rank: 1=best. 5=worst
- Share Price Safety: 2 of 5
- Market Timing: 1 of 5
- Technical Rank: 3 of 5
- Beta: 35
- Stock’s Price Stability: 60/100
- Price Growth Persistence: 60/100
- Earnings Predictability: 55/100
- Projected Average Annual PE: 16
- Average Annual Revenue Growth in the past 5 years: 10.0%
- Average Annual Revenue Growth for the next 5 years: 12.5%
- Average Annual Earnings Growth in the past 5 years: 7.0%
- Average Annual Earnings Growth for the next 5 years: 8.5%
- Average Annual Dividend Growth in the past 5 years: 8.5%
- Average Annual Dividend Growth for the next 5 years: 11.0%
- Projected Average Annual Dividend Yield in 3 to 5 years: 1.6%
American Express Company Q3 September 2023 Financial Highlights (Reported Oct. 20)
- A sixth consecutive quarter of record revenue, up +13% from the year earlier to $15.4 Billion.
- Record earnings per share, increasing by + 34% from a year earlier.
- Net income of $2.5 billion, or $3.30 per share, compared to $1.9 billion, or $2.47 per share, a year ago.
- Strong Card Member spending, up 7% on an FX-adjusted basis.
- Momentum in Travel and Entertainment spending, up 13% on an FX-adjusted basis.
- Millennial and Gen Z consumers are driving growth, with spending up 18% in the U.S. from a year earlier.
- Third-quarter consolidated total revenues net of interest expense at $15.4 billion, up 13% from a year ago.
- Strong credit metrics, with net write-off and delinquency rates below pre-pandemic levels.
- Consolidated provisions for credit losses at $1.2 billion, up from $778 million a year ago.
- Consolidated expenses at $11.0 billion, up 7% from a year ago, primarily due to higher customer engagement costs.
- Consolidated effective tax rate at 20.9%, down from 23.6% a year ago.
- Segment-wise pretax income for U.S. Consumer Services, Commercial Services, International Card Services, and Global Merchant and Network Services.
- Corporate and Other reported a third-quarter pretax loss of $709 million.
Q2 June 2023 Quarter:
- Earnings per share climbed 12.5% to $2.89, reflecting a 12.4% revenue increase from strong card member spending levels.
- Millennial and Gen Z consumers remain the fastest-growing customer group.
- Provision for credit losses almost tripled due to rising net write-offs.
- Cash and equivalents stood at approximately $43.0 billion, while the common equity tier 1 capital ratio was 10.6%.
- Quarterly distribution was raised 15.4% to $0.60 a share.
- Stock buybacks of 20 million AXP shares for $3.3 billion and $1.6 billion in common stock dividends were executed in 2022.
Q1 March 2023 Quarter:
- Revenues rose sharply due to strong card member spending levels.
- Increased expenses and provision for credit losses were noted.
- Earnings per share were expected to recover by 4% for the year.
- The company introduced American Express Business Blueprint for small firms, focusing on digital solutions and acquisitions.
- Quarterly distribution was increased by 15.4% to $0.60 a share.
Q4 December 2022 Quarter:
- Limited progress on the earnings front was observed despite a significant revenue increase.
- Provision for credit losses and total expenses saw notable upticks.
- Plans to acquire Nipendo, a company enabling B2B payment automation, were disclosed.
- Capital gains potential was noted, but long-term upside possibilities were below the Value Line median.
Financial Performance
- 10-year Average Annual Total Return: +8.08% (through Nov.8, 2023) (Dow 30 3rd quartile).
- EPS:
- 2020: $3.77
- 2021: $10.02
- 2022: $9.85
- 2023: e$10.45 > e$11.75 (latest Value Line Quarterly Report)
- 2024: e$10.95 > e$11.00 (latest Value Line Quarterly Report)
- Current PE: 14.3 (FinViz)
- Forward PE: 12.4 (FinViz)
- PEG Ratio: 0.96 (FinViz)
- Beta: 1.20 (FinViz)
SWOT Analysis:
Internal Strength/Weakness
Strengths:
- Market Position: Global market leader and good market hold.
- Financial Strength: Strong free cash flows.
- Brand Portfolio: Investment in a strong brand portfolio.
- Operational Efficiency and Scalability: Leader in automation.
- Customer Relations: High customer satisfaction and loyalty.
- Supply Chain: Reliable suppliers and no supply bottlenecks.
- Dealer Network: Dealer culture promoting product benefits and training.
- Distribution Network: Reliable global distribution network.
Weaknesses:
- AmEx charges higher fees to merchants: This policy limits card acceptance among smaller businesses.
- Cardholders view Amex’s premium and annual fees as too steep.
- Customer relationships must improve: This is a difficult qualitative factor and a long-term challenge to overcome.
- The Consumer Financial Services industry is growing faster than the company.
- AmEx has to carefully analyze trends and determine what it needs to do to drive future growth.
- Difficulty in countering challenges from new market entrants: The business model can be easily imitated.
- AmEx must build a platform model that integrates suppliers, vendors, and end users.
- Limited success outside the core business: The AmEx product line concentrates on one or two main goods.
- Niche markets and local monopolies to exploit are fast disappearing: The customer network is proving less and less effective.
- Traveler’s check business is drastically declining: It has to be revitalized.
- Debit card Shortage: It hinders potential market expansion.
- High attrition rate and increased spending on employee training: Employee turnover leads to higher salaries to maintain talent.
- Declining per unit revenue: Ineffective product demand forecasting leads to missed opportunities and puts downward pressure on profitability.
External Opportunities/Threats
Opportunities:
- International Expansion: Exploring opportunities in global markets.
- New Environmental Policies: Leveraging technology for gaining market share in new product categories.
- Loosening Regulations: Capitalizing on regulatory changes.
- Government Green Drive: Procuring contracts for green products from state and federal governments.
- New Taxation Policy: Identifying ways to increase profitability amidst policy changes.
- Core Competencies Expansion: Diversifying into related product segments.
- New Trends in Consumer Behavior: Identifying and entering markets aligned with changing behaviors.
- Diversification and New Revenue Streams: Exploring opportunities in new product categories.
- Stable Free Cash Flow: Investing in adjacent product segments and new technologies.
- Lower Inflation Rate Benefits: Leveraging rates for customer benefit.
- New Online Customer Channels: Utilizing online platforms and data analytics for better service.
- Fragmented Financial Market Opportunities: Identifying prospects in a diverse market.
- Capitalizing on Reduced Competition: Gaining market share in less competitive environments.
- Synergies from Acquisitions: Leveraging advantages from strategic acquisitions.
- Adoption of New Financial Technologies: Exploring tech-driven revenue opportunities.
- Streamlining Operations: Divesting non-core assets to optimize operations.
Threats:
- Varied Liability Laws: Exposed to liability claims due to differing laws in various countries.
- Counterfeit Products: Risk of imitation and low-quality products, particularly in emerging and low-income markets.
- Shortage of Skilled Workforce: Lack of skilled workers in certain global markets impacting steady profit growth.
- Intense Competition: Stable profitability attracts more players, leading to downward pressure on sales and profitability.
- Currency Fluctuations: Exposure to currency fluctuations, particularly in politically volatile markets.
- Increasing Isolationism: Rising isolationism in the American economy potentially impacts international sales.
- Irregular Innovation Supply: Unpredictable supply of innovative products leading to sales fluctuations.
- The shift in Consumer Behavior: Changing consumer preference toward online channels threatens the existing physical infrastructure-driven supply chain model.
FinViz Snapshot: https://finviz.com/screener.ashx?v=341&f=idx_dji&t=AXP&o=roi
10-Year Historical Price Chart: (from StockCharts.com)
Point & Figure Chart: (from StockCharts.com)
https://stockcharts.com/freecharts/pnf.php?c=AXP,PWTADANRNO[PA][D][F1!3!!!2!20]
Why participate as a Maverick Investor?
Why participate as a Maverick Investor?
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