Personalized Experiences And Global Expansion Will Drive Future Value

Key Takeaways

• Focus on premium cardmembers, product innovation, and younger demographics drives strong retention, international growth, and future earnings stability.
  
• Strong credit quality and disciplined capital strategies support margin expansion, resilience, and enable ongoing investment in network and products.
  
• Rising competition, changing consumer preferences, and pressure from digital payment alternatives threaten profitability and highlight American Express's reliance on a saturated US market for growth.

Catalysts

Operates as integrated payments company in the United States, Europe, the Middle East and Africa, the Asia Pacific, Australia, New Zealand, Latin America, Canada, the Caribbean, and Internationally.

• The company's ongoing focus on premium cardmembers and product refreshes, especially the upcoming U.S. Platinum Card relaunch, positions American Express to benefit from consumers' growing demand for personalized experiences and value-added rewards, likely boosting net card fee growth and retention, which supports long-term revenue and fee income expansion.
  
• Sustained momentum in acquiring younger (Millennial and Gen Z) cardholders, with these groups showing strong spend growth and lower delinquency rates compared to industry averages, suggests a successful strategy in capturing the next generation of affluent consumers, which should drive future billed business and support earnings stability.
  
• Double-digit international growth, ongoing investments in global product innovation, and expanding merchant acceptance tap into the expanding global middle class and increased digital payment adoption, expected to raise transaction volumes and support both top-line growth and long-term earnings diversification.
  
• Robust credit quality and risk management, as demonstrated by industry-leading performance in the Fed's stress tests, enable American Express to pursue premium lending strategies and balance sheet growth without a commensurate rise in credit costs, supporting margin expansion and earnings resilience.
  
• Capital discipline and strong returns on equity, alongside significant shareholder returns via dividends and buybacks, provide financial flexibility to continue investing in network, product enhancements, and partnerships, enhancing long-term growth prospects for both revenue and EPS.

American Express Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming American Express's revenue will grow by 10.6% annually over the next 3 years.
• Analysts are assuming American Express's profit margins will remain the same at 15.8% over the next 3 years.
• Analysts expect earnings to reach $13.5 billion (and earnings per share of $19.84) by about September 2028, up from $10.0 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $11.6 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.3x on those 2028 earnings, down from 22.5x today. This future PE is greater than the current PE for the US Consumer Finance industry at 10.5x.
• Analysts expect the number of shares outstanding to decline by 1.22% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.44%, as per the Simply Wall St company report.

American Express Future Earnings Per Share Growth

Risks

• Intensifying competition in the premium card segment, with major banks like Chase, Citi, and Capital One significantly refreshing their offerings, could lead to higher customer acquisition and retention costs, eroding American Express's net margins and overall profitability.
  
• Ongoing shift in consumer behavior, particularly among younger generations increasingly favoring mobile wallets, debit, and alternative payment solutions (e.g., BNPL), may limit long-term credit card adoption and slow customer growth, negatively impacting future revenue growth.
  
• Higher variable customer engagement expenses (VCE), including increased rewards, serviced benefits, and marketing spend to maintain differentiation in a crowded premium market, could outpace revenue growth over time, putting sustained pressure on net margins.
  
• Slower international market share expansion compared to peers, despite strong recent growth, suggests American Express remains heavily reliant on a mature US market for earnings; lack of meaningful diversification could constrain long-term earnings growth potential if US premium consumer spending stagnates.
  
• Potential disruption from real-time, low-cost digital payment alternatives (such as stablecoins, CBDCs, or instant payments) may gradually reduce reliance on traditional credit card rails, challenging Amex's transaction fee revenue and forcing costly adaptation in technology and compliance, directly affecting future profitability.

Valuation

• The analysts have a consensus price target of $322.235 for American Express based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $375.0, and the most bearish reporting a price target of just $265.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $85.7 billion, earnings will come to $13.5 billion, and it would be trading on a PE ratio of 20.3x, assuming you use a discount rate of 8.4%.
• Given the current share price of $324.34, the analyst price target of $322.23 is 0.7% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.