AmEx Stock Trails S&P 500, Declines 21% YTD: Time to Buy or Cash Out?

American Express Company AXP shares have dropped 21.3% year to date, underperforming the S&P 500’s 14.1% decline. The broader industry also struggled, falling 22% over the same period. In contrast, larger peers like Visa Inc. V and Mastercard Incorporated MA have held up better, shedding comparatively less value this year. The downturn has been driven by concerns around potential tariff wars, stubborn inflation and uncertainty over interest rate cuts, all of which have dampened investor sentiment.Price Performance – AXP, V, MA, Industry & S&P 500 Image Source: Zacks Investment ResearchWith the recent slide, AmEx is now 8.9% closer to its 52-week low of $214.51. That may tempt investors looking to buy the dip; after all, conventional wisdom says to buy low. But before making a move, it’s important to evaluate the company’s fundamentals, operational strength and current market environment to determine if the stock truly offers value at this level.American Express in the Current MarketWhile often grouped with Visa and Mastercard, AmEx operates under a distinctly different business model. Visa and Mastercard don't issue credit cards themselves; instead, they earn revenue by charging merchants "swipe fees" for transactions processed through their networks. In contrast, AmEx acts as both a card issuer and a payment processor, meaning it takes on the full credit risk associated with its cardholders.Although this model may appear riskier on the surface, AmEx relies heavily on its affluent, low-risk customer base. Its clients typically have higher incomes and strong credit scores, which helps minimize credit risk despite the added exposure.In today's uncertain domestic market, economists and traders have increased their expectations for Federal Reserve interest rate cuts. However, Fed Chair Jerome Powell has adopted a cautious “wait-and-see” stance for the time being. A decline in interest rates could weigh on AmEx’s banking segment by reducing net interest income. At the same time, lower rates tend to stimulate consumer spending, a potential boost for AmEx’s core credit card business, where swipe fees play a major role. Conversely, in a high-rate environment, its credit card operations may face pressure, but the banking division could benefit from stronger margins.AXP’s ValuationFrom a valuation standpoint, American Express appears slightly more expensive than the industry average, but that doesn’t tell the full story. The stock currently trades at a forward price-to-earnings (P/E) ratio of 14.70X compared to the industry’s average of 13.18X. While this is a premium, it’s actually below AmEx’s own five-year median P/E of 16.73X, suggesting room for upside based on historical norms.By comparison, Visa and Mastercard have much higher valuations, trading at forward P/E ratios of 26X and 29.49X, respectively. AmEx’s current valuation may be justified given its solid fundamentals and resilient customer base. Image Source: Zacks Investment ResearchAmEx’s Positives to NoteAs of the fourth quarter, American Express held $40.6 billion in cash and cash equivalents, with only $1.4 billion in short-term debt, a healthy liquidity position. In 2024, the company generated $14 billion in net cash from operations, which supports its ability to invest in growth and return value to shareholders. Last year, AmEx returned $7.9 billion through dividends and share buybacks. Notably, in March 2025, it raised its quarterly dividend by 17% to 82 cents per share. As of Dec. 31, 2024, 75 million shares remained under its authorized repurchase program.AmEx’s strong fundamentals are reinforced by a loyal customer base, high card acquisition rates and strong retention. Its premium clientele continues to drive steady card fee revenue. Strategically, the company has ramped up marketing toward younger generations, particularly Gen Z and millennials. While these segments tend to spend less initially, AmEx sees them as long-term growth opportunities, aiming to build brand loyalty early and sustain engagement over time.With a growing and diversified customer base, solid financials, and a forward-looking strategy, AmEx is well-positioned to drive continued earnings and revenue growth, making it an attractive option for long-term investors.AmEx’sEstimates & Earnings Surprise HistoryThe Zacks Consensus Estimate for 2025 earnings indicates a 14.5% year-over-year increase, while 2026 earnings are expected to grow by 15%. Revenue estimates for 2025 and 2026 indicate year-over-year growth of 8.6% and 8.3%, respectively.Additionally, AmEx has surpassed earnings estimates in each of the past four quarters, delivering an average surprise of 6.9%.American Express Company Price and EPS Surprise American Express Company price-eps-surprise | American Express Company QuoteDon’t Rush to Buy AXP Stock Just YetWhile American Express shows long-term promise, there are near-term headwinds worth considering. The company’s expenses have steadily climbed, putting pressure on profit growth. In 2021, total expenses rose 22% to $33.1 billion, followed by a 24% increase in 2022, largely driven by higher costs related to rewards, business development, and services. Although expense growth slowed to 10% in 2023 and 6% in 2024, variable costs — especially in customer engagement and marketing — are expected to keep rising. As network volumes and travel-related spending increase, so too will Card Member rewards and service costs, likely weighing on margins.AmEx is also more exposed to domestic economic fluctuations compared to Visa and Mastercard, which have broadened their reach through global digital payment infrastructure. AmEx’s growth remains closely tied to lending and card volume, making it less flexible in adapting to evolving non-card payment trends.For existing shareholders, the company’s steady operations, resilient customer spending and long-term initiatives remain compelling. However, prospective investors might consider waiting for a more attractive entry point. It is also important to monitor potential regulatory changes and shifts in consumer spending habits, both of which could significantly impact AXP’s outlook.With American Express currently carrying a Zacks Rank #3 (Hold), new investors may want to stay on the sidelines until stronger buy signals emerge. 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(V): Free Stock Analysis Report American Express Company (AXP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks