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

Dividendology
23 Aug 202411:20

Summary

TLDRThis 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.

Outlines

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Mindmap

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Investing InsightsStock AnalysisAmerican ExpressDividend GrowthFinancial StrategyCredit Card NetworksMarket PerformanceInvestor EducationBusiness ModelPortfolio Management