AmEx Stock Trades Near 52-Week High: What's Next for Investors?

American Express Company AXP closed at $287.64 on Wednesday, just 3.1% shy of its 52-week high of $296.83. The strong core fundamentals of its business, coupled with its growing focus on Gen-Z and Millennial customer base, are reaping significant rewards and driving sustained growth in revenue and brand loyalty.AXP’s shares have gained 19% in the past six months, outperforming the industry and the S&P 500 Index. Over this time frame, the industry and the S&P 500 Index gained 14.6% and 12.8%, respectively. Due to its solid prospects, AXP even outperformed its peers Mastercard Incorporated MA and Visa Inc. V, which have gained 13.9% and 9.9%, respectively, in the same time frame.AXP’s 3-Month Price PerformanceImage Source: Zacks Investment ResearchThe proximity to its 52-week high underscores investors’ confidence and market optimism about this payments company’s prospects. Moreover, the stock is trading above its 50-day and 200-day moving averages, signaling strong upward momentum.Now, let's have a look at the growth drivers of AXP.Growth DriversAmEx benefits from a loyal customer base coupled with high levels of new card acquisitions and solid retention levels. The company expects its premium customer base to continue driving its card fee revenue growth, which came in at 18% in the third quarter of 2024. Total card member spending increased 6% year over year in the third quarter, and new premium card acquisitions came in at 3.3 million.American Express’s product refreshes are a major growth driver, appealing to both current and potential premium cardholders. The company targets higher acquisition and retention rates by enhancing benefits and services and increasing annual fees. This approach succeeded with the U.S. Consumer Gold Card, where updated benefits led to strong new sign-ups and high retention rates.Further rate cuts by the Federal Reserve will also spur consumer spending, positively impacting AXP’s discount revenues. Enhancements to its existing cards will allow AXP to charge more card fees, benefiting its top line.Per AXP, Gen Z will be the largest customer segment worldwide by 2030. Hence, an increasing focus on this segment should reap benefits for the company in the long run. Product innovation and strategic partnerships are also helping AXP broaden its reach and boost customer engagement.AXP continues to return value to its shareholders through dividend payments. American Express bought back 8 million common shares in the third quarter of 2024. The company paid a per-share dividend worth 70 cents in the third quarter of 2024. Its dividend yield of 1% is higher than 0.6% of Mastercard and 0.7% of Visa.Robust 2024 and Long-Term OutlookAXP increased its full-year 2024 earnings guidance between $13.75 and $14.05 per share, reflecting a 24% increase year over year. The expected earnings growth comes in higher than the company’s long-term guidance of mid-teens. Revenue growth is expected to be 9% year over year for 2024. The company expected revenue growth of more than 10% over the long term.Better Returns Than IndustryAXP’s trailing 12-month return on equity (ROE) is indicative of its growth potential. ROE for the trailing 12 months is 32.5%, much higher than the industry’s 19.4%, reflecting the company’s efficient use of shareholders’ funds.Image Source: Zacks Investment ResearchEarnings Estimate RevisionEarnings estimates for AXP have moved north over the past 60 days, reflecting analysts’ optimism. AXP beat earnings estimates in three of the past four quarters, average surprise being 6.5%.The Zacks Consensus Estimate for 2024 EPS is pegged at $13.40, suggesting year-over-year growth of 19.5%. The consensus mark for 2025 EPS is pinned at $15.15, indicating a year-over-year increase of 13%. As earnings estimates increase, the stock is likely to follow suit.Image Source: Zacks Investment ResearchWhat Might Weigh on AXP’s Performance?One of AXP’s major expenses is its card member rewards. It rewards cardholders with lucrative offers to lure them to spend more, which will increase the discount revenues of AXP. The metric rose 10% in the third quarter of 2024. A rise in card member rewards might hamper AXP’s bottom line in the future.AXP Stock ValuationFrom a valuation perspective, AXP is trading at a premium compared to the industry’s average. The company's shares are currently priced at a forward price/earnings ratio of 19.28X, which is higher than the industry’s average of 16.23X. Despite its current premium valuation, we believe the stock has significant upside potential, driven by its robust business model and recent positive developments.It is trading cheaper than its peers like Mastercard and Visa, which trade at 32.28X and 27.24X, respectively.Image Source: Zacks Investment ResearchFinal ThoughtsAmerican Express is well-positioned for growth with rising card fees and interest income, supported by a strong Millennial and Gen-Z customer base. Product refreshes are aiding the company in achieving strong retention and attracting more customers. Strong fundamentals should enable AXP to sail through a softer spend environment in the future.However, its premium valuation compared to the industry and ongoing challenges may limit its short-term potential. For long-term investors, AXP’s strong fundamentals may justify holding the stock, but potential investors might remain cautious of the stock’s high price amid rising reward expenses.American Express currently sports a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Free: 5 Stocks to Buy As Infrastructure Spending SoarsTrillions of dollars in Federal funds have been earmarked to repair and upgrade America’s infrastructure. In addition to roads and bridges, this flood of cash will pour into AI data centers, renewable energy sources and more.In, you’ll discover 5 surprising stocks positioned to profit the most from the spending spree that’s just getting started in this space.Download How to Profit from the Trillion-Dollar Infrastructure Boom absolutely free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Mastercard Incorporated (MA): Free Stock Analysis Report Visa Inc. (V): Free Stock Analysis Report American Express Company (AXP): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks