American Express: A Descent into Value?

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The matter of American Express (AXP 2.44%) presents itself as a peculiar accounting. The stock, it seems, is subject to a decline not entirely commensurate with the firm’s reported performance. Fears, whispered among analysts and echoed in the fluctuating indices, concern the potential obsolescence of white-collar labor due to these… ‘artificial intelligences,’ coupled with the ever-present, vaguely defined ‘geopolitical uncertainties.’ The result, as of this observation, is a price hovering around $300. One begins to suspect a systemic miscalculation, a rounding error in the grand ledger of the market itself.

But has this decline proceeded to a point of irrationality? The question feels less about valuation and more about the inherent logic – or lack thereof – governing these transactions. The company’s recent reports, while appearing positive on the surface, are merely data points in a much larger, and ultimately unknowable, equation.

Indeed, the lender and credit card issuer concluded 2025 with figures that, in isolation, might be described as ‘excellent.’ Record revenue, a doubling of earnings, a refreshed Platinum card – these are not insignificant details. Yet, they feel…procedural. As if the firm is dutifully executing a pre-ordained plan, regardless of the external conditions. The financial guidance for 2026, while promising, is merely a projection, a carefully constructed illusion of control.

The Illusion of Momentum

The full-year revenue, adjusted for interest expense, rose by 10% to $72.2 billion. Earnings per share increased by 10%, or 15% excluding the sale of Accertify. These figures are presented as evidence of growth, but one wonders if they are merely a consequence of the relentless, automated processes that drive the modern financial system. The quarterly reports, with their precise percentages and decimal points, feel less like indicators of performance and more like bureaucratic affirmations of existence.

In the fourth quarter, revenue rose by 10% to $19.0 billion, and earnings per share increased by 16% to $3.53. Card member spending increased by 9%, or 8% on an FX-adjusted basis. Net card fee revenue grew at a double-digit rate for the 30th consecutive quarter. This relentless consistency is unsettling. It suggests a system operating on autopilot, impervious to external forces.

The credit quality of the customer base remains, ostensibly, ‘strong.’ Full-year net write-offs were 2%, flat from the prior year. However, the slight uptick in the fourth quarter – to 2.1% from 1.9% – is a subtle warning. A hairline fracture in the façade of stability. It suggests that even the most carefully constructed systems are vulnerable to unforeseen pressures.

Of course, to dismiss the market’s anxieties entirely would be… imprudent. If these ‘artificial intelligences’ do, in fact, disrupt the workforce, American Express – with its focus on higher spenders – could find itself disproportionately affected. The possibility of a decline in consumer confidence, triggered by geopolitical events, is also a concern. These are merely contingencies, of course. But in a system as complex as the modern financial market, even the smallest contingency can have catastrophic consequences.

A Relative Valuation

At approximately $300 per share, American Express trades for roughly 19.5 times earnings. However, the stock also trades for only about 16.8 to 17.3 times management’s 2026 earnings guidance of $17.30 to $17.90 per share. This discrepancy is presented as a sign of value. But one wonders if it is merely a reflection of the market’s inherent irrationality. A momentary lapse in judgment. A rounding error in the grand calculation.

A valuation like this is deemed ‘reasonable’ for a high-quality lender and credit card issuer with a strong outlook for 2026. Management is guiding for 2026 revenue growth of 9% to 10% and EPS growth of roughly 12% to 16%. If American Express can deliver on these projections while maintaining credit quality, the stock does not appear overpriced at $300. But such assurances feel… tenuous. Based on projections, not certainties.

The company’s capital return program – a growing dividend and aggressive share repurchases – is presented as further support for the valuation. The dividend yield is currently 1.2%. The company returned approximately $7.6 billion to shareholders in 2025, with $5.3 billion through share repurchases and $2.3 billion through dividends. The average diluted share count fell by approximately 2%, providing a tailwind to earnings per share. These are merely accounting maneuvers, of course. Shifting numbers from one column to another. But they create the illusion of value.

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So, is it time to acquire American Express stock? For investors seeking a ‘clear bargain,’ probably not. American Express remains a premium business, and the stock still trades at a valuation that leaves little room for error. But for investors willing to accept some risk, this may be a suitable entry point. The business is performing well, management is guiding to another year of strong growth, credit metrics look healthy, and the company is aggressively buying back its stock. However, one should consider keeping any position in the stock small and carefully monitoring the uncertain macroeconomic environment.

Even with these risks, the stock appears to be a reasonable bet for the long haul. But one should not mistake a calculated risk for a guarantee. The market is a labyrinthine system, and even the most careful calculations can be undone by unforeseen events. The only certainty is uncertainty.

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2026-03-06 21:43