Is American Express Stock a Buy Now!? | American Express (AXP) Stock Analysis! |

Summary

This video script discusses American Express (ticker: AXP) as an underappreciated investment compared to Visa and MasterCard. It highlights AXP's strong performance, with a 56% rise in the past year and a 177% increase over a decade. The script emphasizes AXP's unique membership model, high customer spending power, and subscription-like revenue, which includes significant annual card fees and merchant discount fees. It also notes AXP's aggressive share buyback strategy, reducing outstanding shares by over 25% in the past decade. The video concludes with a stock valuation, suggesting an intrinsic value of around $268 per share, making it an attractive investment for those interested in both growth and dividends.

Takeaways

• 📈 American Express (ticker: AXP) has seen significant growth, with its stock price up over 56% in the past year.
• 🏦 By purchase volume, American Express ranks as the third-largest credit card network in the US, following Visa and MasterCard.
• 📊 Historical performance shows impressive gains, with approximately 100% growth over the past 5 years and 177% over the past decade.
• 💰 American Express offers a higher dividend yield compared to Visa, with a 10.5% free cash flow payout ratio, indicating strong cash flow management.
• 🔄 The company has been aggressive in share buybacks, reducing outstanding shares by over 25% in the past decade, enhancing shareholder value.
• 🔑 A key differentiator for American Express is its membership model, which includes a premium customer base and subscription-like revenue streams.
• 💳 The company's cards, like the Platinum card, come with high annual fees, attracting a high-income customer segment and resulting in higher spending per card.
• 📉 American Express has a unique business model with a significant portion of its revenue coming from spend and fee revenues, unlike its peers.
• 💼 The company has shown strong brand loyalty, with a 98% business retention rate, and the industry is projected to grow at an annual rate of 8%.
• 📊 Valuation analysis suggests an intrinsic value of around $268 per share, with American Express trading above its intrinsic value, indicating a potential overvaluation.

Q & A

What is the current stock price of American Express?

The current stock price of American Express is $248 per share.

How has American Express' stock performed over the past year?

Over the past year, American Express' stock has increased by over 56%.

What is American Express' position among top credit card networks in the US by purchase volume?

American Express is the third largest credit card network in the US by purchase volume, following Visa and MasterCard.

What are the key differences between American Express and its peers Visa and MasterCard?

American Express has a membership model, higher spending power per card, subscription-like membership fees, and a unique way of pocketing the difference in full for merchant discount fees, which sets it apart from Visa and MasterCard.

What is American Express' dividend yield and how does it compare to Visa's?

American Express' dividend yield is 1.13%, which is a bit higher than that of Visa.

How has American Express' dividend growth performed over the past 5 and 10 years?

American Express has seen double-digit dividend growth over both the past 5 and 10 years.

What is American Express' free cash flow payout ratio and what does it indicate?

American Express' free cash flow payout ratio is about 10.5%, indicating that the company uses a small portion of its free cash flow for dividends, leaving a significant amount for reinvestment and share buybacks.

How has American Express reduced its outstanding shares over the past decade?

American Express has aggressively bought back shares, reducing its outstanding shares by over 25% from about 1.08 billion to around 735 million by the end of 2023.

What is the projected growth rate for US consumer credit card billings?

US consumer credit card billings are projected to grow at an annual rate of 8%.

What is American Express' return on equity and how does it reflect the company's financial health?

American Express has a very high return on equity, indicating strong financial performance and efficient use of shareholders' equity.

Based on the script, what is the estimated intrinsic value of American Express stock?

The estimated intrinsic value of American Express stock, based on the script, is about $268 per share when averaging different valuation methods.