However, rising inflation has affected consumer spending and led to credit card defaults, weakening the post-pandemic recovery.
However, AXP’s diverse and loyal customer base has allowed the company to survive the economic downturn and achieve positive results recently. Hence, the company’s financial factors and growth drivers make it very attractive. We are optimistic about the stock.
American Express is pulling itself together in the post-pandemic era
Like other credit card providers, the American Express business has taken a hit during the pandemic. However, it soon expanded its services to target the new young population of affluent American citizens. This growth strategy helped the company motivate more people to sign up for credit cards and boost the Amex brand.
Now that the pandemic is over, American Express is back in business. The company enjoyed high sales due to the increase in travel spending. As AXP reports quarterly, travel spending reached pre-pandemic levels for the first time in March.
Fortunately, spending on travel and entertainment during the quarter doubled by 121%. According to the company’s CEO, Stephen Squire, future travel bookings are up 37% in the US and 48% globally compared to 2019.
This level of recovery in travel and leisure is a catalyst for growth in the following period. Therefore, you may want to keep AXP stock on your radar.
American Express: Excellent results in the first quarter of 2022
In April, AXP reported a strong first quarter due to continued business momentum. The company’s revenue jumped 29.5% year-on-year, to $11.7 billion. Furthermore, earnings per share were $2.74, beating Wall Street estimates by more than 11%.
Company network volumes increased 30% year over year to $350.3 billion in the first quarter, thanks to increased spending. Similarly, net write-offs remained low, indicating that the company is facing fewer problems related to deteriorating credit quality.
Furthermore, American Express ended the first quarter with cash and cash equivalents of $28 billion, a sequential increase of $6 billion. In addition, AXP’s debt has decreased from $39 billion at the end of 2021 to $38 billion as of March 2022.
Analysts expect the company’s revenue to grow 19.4% for the full year 2022. Meanwhile, earnings are expected to decline 2.5% to $9.77 per share.
The company’s dividend program and share buybacks also provide great incentives to investors. Shares of American Express jumped 0.6% on March 10 after the company reported a 20% increase in its quarterly dividend.
American Express has been a regular dividend paying company for more than three decades, which is very commendable. Additionally, the company has been consistent with its stock buyback program to reward existing shareholders.
These buybacks and dividends paint a strong picture for the company despite the volatile environment. Moreover, she has enough cash to invest in her future without running out of money anytime soon.
Hence, American Express seems like a promising investment considering its profitable results, growth prospects, and valuation (which I mentioned in the conclusion).
Wall Street acquires AXP shares
Moving to Wall Street, AXP stock maintains a medium buy rating. Of the 18 analyst evaluations, nine have been assigned nine buys, nine reservations, and zero sell records over the past three months.
The average target price for AXP’s stock is $178.31, implying a 19.8% upside potential. Analyst price targets range from $143 per share to $210 per share.
Conclusion – AXP Shares Can Reward Investors
American Express appears to be undervalued and trades at only 2.2 times forward sales. Furthermore, AXP management is bullish, given its strong first-quarter report, encouraging expectations, and recent dividend increases.
In addition, the company has a lot of cash on its balance sheet. In the coming months, a rebound in travel demand should continue to drive AXP stock. Therefore, I expect another strong showing in the coming quarters and the whole year. The company announced its second-quarter results on July 22.
Overall, American Express looks like a stock that could reap great returns in the future and serve as a staple for investors’ portfolios.