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Why Hold Strategy is Apt for American Express (AXP) Stock

American Express Company AXP is well-poised to grow on the back of improving travel and entertainment spending, growing digital capabilities, and strategic acquisitions. Its shareholder-value-boosting efforts are well-recognized by investors.

AmEx — with a market cap of $113 billion — is a diversified financial services company, offering charge and credit payment card products, and travel-related services worldwide. Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.

The Zacks Consensus Estimate for AXP’s 2023 earnings is pegged at $11.16 per share, indicating 13.3% year-over-year growth. The stock has witnessed two upward estimate revisions in the past week against none in the opposite direction. American Express beat on earnings in two of the last four quarters and missed twice. This is depicted in the graph below.

American Express Company Price and EPS Surprise


American Express Company Price and EPS Surprise
American Express Company Price and EPS Surprise

American Express Company price-eps-surprise | American Express Company Quote

The consensus mark for current-year revenues stands at $61 billion, suggesting a 15.4% rise from the prior-year reported number. In the long run, the company expects revenue growth of more than 10% and earnings growth in the mid-teens.

AmEx’s growing card member acquisitions indicate that new clients and younger generations are being attracted toward its product offerings. Total network volumes are expected to continue on its growth path as the company expands into more developing economies. Our estimate for network volumes for 2023 indicates a 15.6% year-over-year increase.

Higher loan volumes are likely to keep boosting its U.S. Consumer Services segment, which witnessed a 25% year-over-year jump in revenues, net of interest expenses, in the first quarter. Our estimate for total card member loans for 2023 indicates 13.4% growth from that reported a year ago.

AmEx’s measures to reward shareholders through dividends and share buybacks are noteworthy. Owing to its solid capital position, the company returned $4.9 billion to its shareholders in 2022. Further, it hiked quarterly dividends by 15% to 60 cents per share in the first quarter of 2023.

Key Risks

However, there are a few factors that might hinder the stock’s growth.

Rising expenses are trimming its margins. Last year, expenses jumped 24% year over year. We expect total expenses for 2023 to jump 11.9% year over year. Also, AXP’s 12-month forward price-to-earnings multiple of 13X is higher than 11X of the industry, making it a little expensive at the current level. Nevertheless, we believe that a systematic and strategic plan of action will drive AmEx’s growth in the long term.

Key picks

Some better-ranked stocks in the broader finance space are Allianz SE ALIZY, Lemonade, Inc. LMND and Argo Blockchain plc ARBK, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Allianz’s 2023 earnings is pegged at $2.53 per share, indicating 48% year-over-year growth. Over the past 60 days, ALIZY has witnessed one upward estimate revision against none in the opposite direction.

The Zacks Consensus Estimate for Lemonade’s 2023 earnings suggests 15.9% year-over-year growth. Also, the consensus mark for LMND’s revenues in 2023 suggests a 53.6% year-over-year rise.

The Zacks Consensus Estimate for Argo Blockchain’s 2023 bottom line has improved 47.9% over the past month. During this time, ARBK witnessed two upward estimate revisions against none in the opposite direction.

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American Express Company (AXP) : Free Stock Analysis Report

Allianz SE (ALIZY) : Free Stock Analysis Report

Lemonade, Inc. (LMND) : Free Stock Analysis Report

Argo Blockchain PLC Sponsored ADR (ARBK) : Free Stock Analysis Report

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