American Express Stock Forecast
American Express is a globally recognized credit card company that traces its roots back to the mid-1800s. Famous investor Warren Buffett owns American Express stock under his company Berkshire Hathaway.
Readers may know the company as the preferred card for people who often travel for work or pleasure. American Express’s credit cards offer cardholders frequent flyer miles, cash back and other rewards and perks.
In the past, cardholders mainly used their cards for travel. Though cardholders could use American Express cards for everyday purchases, many places did not accept American Express cards. Over the last few years, that has changed. In recent years, though, American Express has grown its business. American Express cards are accepted almost everywhere.
In addition, the company has been growing its services to small and medium-sized businesses. American Express cards boast 45% of U.S. small and medium business spending. Business owners can now get checking and business loans from American Express in addition to their credit cards.
One thing that remains true today is the high credit scores of its cardholders. The average FICO score for cardholders in 2021 was 750. The company considers credit scores that high to be ‘super-prime.’
Younger cardholders like the new strategy. The fastest-growing customer age cohorts are Millennials and Gen Z. All these changes could mean big things for the stock.
If you’re jotting down notes for your American Express stock forecast, you may want to consult the company’s fourth-quarter and full-year earnings presentation. American Express said that they think sales will grow between 18% and 20% for the year. In addition, they expect earnings per share between $9.25 and $9.65 for 2022.
Most companies do not publicly state forecasts beyond the current year. However, American Express did just that. The company also voiced its confidence beyond 2022.
By 2023, the company expects to continue a swift recovery from the COVID-19 pandemic. During 2024 and after that, American Express thinks revenue can grow in excess of 10% and earnings per share can grow in the mid-teens percent.
American Express is willing to stick its neck out on its guidance for a few reasons. Because its cards are now accepted almost everywhere, the company expects card usage to increase above pre-pandemic levels. Younger cardholders who view American Express as more than just a travel card may also increase card usage.
On top of that, American Express’s small and medium businesses segment should perform well. In 2020, 4.4 million new businesses started. That number was passed in 2021 as 5.9 million new businesses started. Both were the highest number in years. American Express should benefit from the trend.
American Express Stock Earnings
A closer look at the company’s fourth-quarter and full-year presentation shows American Express stock earnings per share of $10.02 for 2021. Earnings per share were up 166% over 2020. However, readers should know that part of the increase in earnings per share was due to one-time gains.
The presentation also shows that sales were up 17% to $42,380 billion for the year. Sales growth for 2021 is in line with the company’s forecasted sales growth of more than 10%.
American Express will release its first-quarter earnings on April 22 at 8:30 a.m. EST. Management will be hosting a webcast to discuss the report and answer questions from listeners. Readers can find a link to the webcast here.
Interested readers can tune in to see if American Express is executing its strategy. After management finishes their prepared remarks, you can directly ask questions to the team.
Industry analysts think the company will report earnings per share of $2.43 for the first quarter. For the full year, analysts think earnings per share will be $9.74. Interestingly, the full-year analyst forecast is slightly above the estimate from American Express.
Conclusions on American Express
Though the future may seem bright for American Express, investors must ask themselves if the stock price presents a good value. The stock price is currently about $181 per share.
Say the company’s earnings per share ended up at $9.45 (the midpoint of guidance) for 2022. The current share price would imply a forward price-to-earnings ratio (P/E ratio) of just over 19x. A lower P/E ratio is a higher value for the stock.
If you think American Express can keep performing well as a company, the stock might be a good value. Investors should also think about the other stocks in their accounts. If you think American Express is a better value than your current stocks, you might want to trade American Express for one of the stocks in your account.
On the other hand, the stocks in your portfolio may be a better value than American Express stock. If that is the case, maybe you should pass.
About BJ Cook
BJ Cook is a long-time stock nerd. He has held several roles in the equity research world and earned the right to use the CFA designation in 2014. When he’s not writing for Investment U, you can find him searching for new investment ideas. Outside the investment community, BJ is a die-hard Cubs fan.