American Express Not A Top Buy, Even With Its Additional Perks

american-express-not-a-top-buy,-even-with-its-additional-perks

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This week has been a busy one for American Express.

The globally integrated payments firm has had a busy year, in fact, charging up over half a billion dollars in losses in the second quarter of 2020 alone. However, although the company reported an 85% slump in quarterly profit as of June 30, they still turned a profit – which is more than can be said for some companies this year.

Since midsummer, when the company’s Q2/20 financial information was released, American Express has stabilized from their turbulent springtime swings. And, although the company is still hanging on at the cusp of a bear market 19.5% down for the year, they have a multi-pronged plan to make right with their cardholders and investors.

Hence, their busy week – or more specifically, their busy Tuesday.

Introducing Scottie Pippen, and…

One of the first announcements to come out about American Express on Tuesday was their partnership with NBA legend Scottie Pippen and Calm, a meditation app. This unlikely trio came together to narrate an oral history of basketball for Calm’s podcast. The episode, “The History of a Dream,” is one in a series of sleep stories designed to induce sleep for users.

As for American Express’s role, the company announced that eligible cardholders will receive a one-year premium membership with Calm.

New Perks, and…

Additionally, American Express announced that those with platinum cards will be treated to new perks this fall in an effort to boost credit card traffic (and traffic in general). Most of these perks revolve around decisions out of the company’s latest poll, which reports that many individuals are looking – or have already begun – to travel again.

American Express decided to make this process easier for their customers, offering perks such as bonus dollars for booking hotel rooms, free stays, and even access to lower plane fares for booking trips by a set date.

While including these perks is a bittersweet reminder that 2020 didn’t kick off the decade in a positive light, it’s also a way for the company to bolster goodwill, sales, and stock prices.

A New Report (Plus a Reportedly New Credit Card)

To top off their busy Tuesday, American Express published their first-ever Environmental, Social, and Governance Report. This document provides their stakeholders with an in-depth look at some of the company’s operations, from diversity and inclusion to global philanthropic endeavors.

And then, to dab the icing copiously on the cake, American Express reported the launch of a co-branded credit card with shipping and marketplace behemoth Amazon

AMZN
. The card is aimed at small-to-medium businesses (SMBs) in the U.K. and marks an international extension of the duo’s U.S.-based branded program.

What Does This Have to Do with Their Stock?

This is a lot of information to release (and take in) in one day. At face glance, it appears to have little to do with the company’s stock prices – other than providing investors with information, of course.

However, telling investors what they want to hear often has a positive effect on the market, and American Express cashed in as their stock rose a full $2.50 on Wednesday.

But, before you rush out and buy the company’s stock, it’s important to know where the company stands in its financial performance. After all, there’s a reason they released so much information in one day.

Thus, from the fundamentals to the financials, Q.ai is here to provide you with a more in-depth look at American Express. Our AI (Artificial Intelligence) digs deep into the numbers that make the company – and we’re ready to share what we know in the month of October.

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American Express Company

AXP
(AXP) By the Numbers

American Express Company closed up 2.56% on Wednesday to $100.25, ending the day on volume over 4.8 million shares. This is a welcome gain in the midst of a turbulent year, as American Express has had a topsy-turvy few months, as shown in the 10- and 22-day price averages of $98.88 and $101.86, respectively.

Overall, the stock is still down over 19.5% for the year, marking the company’s struggle to turn lagging consumer spending and increasing debt on its head.

However, the company’s has performed strongly in recent years. While it can’t directly offset the effects of its stock market losses, it does underpin a company with decent fundamentals.

For instance, revenue increase from $33.9 billion three years ago to nearly $40 billion in the last fiscal year, with 1.15% of that occurring in the last year. Their operating income has expanded too, from $7.5 billion to nearly $8.6 billion in the same time frame.

Additionally, their EPS has shot up by nearly 63% across three years, from $2.99 to $7.99.

Moreover, the company’s ROE has over doubled, from 14.2% to 29.8%.

All of this data paints a picture of a company on the uptick, at least in practice. While American Express’s future prospects aren’t as bright as they would have been without the pandemic, seeing such large losses in stock prices and consumer spending means there’s nowhere to go but up.

As such, the firm is trading with a forward 12-month P/E of 18.13, while forward revenue is expected to grow by 3.2% in the next year.

So, What’s the Verdict?

American Express has shown decent growth across the board in the past three years – but as far as the market concerned, it’s this year that matters.

And unfortunately, our AI has dug deep into the company’s financials and performance this year and determined a below-average report card, with its highest grade a B in Technical. Further metrics received a C in Momentum Volatility, a D in Quality Value, and a big, fat F in Growth.

As a result of the company’s turbulent stock market performance this year, as well as an overabundance of good news to make up for a lack of consumer spending and abysmal grades from our AI, American Express has received a Neutral rating for the month of October.

Invest at your own risk.

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