Is American Express Still Worth Buying at Today's Price?
Key Points
American Express raised full-year revenue guidance, but investors weren’t impressed.
The company’s strong brand is resonating extremely well with younger consumers.
At a price-to-earnings ratio of just under 20, shares appear fairly valued.
- 10 stocks we like better than American Express ›
The overall market is up this year, but American Express (NYSE: AXP) has been a big loser. Its shares have fallen almost 12% (as of July 24). This is despite the company continuing to operate at a high level.
This financial stock currently trades at around $326. Is it still worth buying today? Investors should first understand the quality of this business before looking at valuation.
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The positive long-term trend masks mixed second-quarter results
During the three-month period ended June 30 (the company's second quarter), American Express reported a 10% year-over-year revenue increase to $19.6 billion. This missed Wall Street expectations.
Diluted earnings per share (EPS) totaled $4.53, up 11% compared to Q2 2025. The bottom-line figure beat analyst estimates.
Management raised revenue guidance to a 10% year-over-year gain for the full year. The EPS forecast was kept unchanged. This might have disappointed investors, as the stock immediately fell 7%.
Despite the market's immediate reaction to the company's latest financial update, investors have every reason to remain bullish. The positive long-term trend holds, as American Express continues to post solid revenue and profit gains. There's no reason to believe this will let up.
Member spending grew by 9% in Q2, which was the fastest pace in more than three years on a currency-neutral basis. This is particularly encouraging in today's uncertain macro environment. And it highlights American Express's strong position among affluent customers.
The company is attracting millennials and Gen Zers to its most popular products. Getting these people into the American Express ecosystem early in their professional lives means the business can capture tremendous lifetime value.
Turning to the industry, competition is fierce. However, American Express has the premium brand recognition, something that has stood the test of time, to win new members against similar offerings from other well-known credit card issuers. Consumers appreciate the top-notch perks and rewards they receive.
Looking out at the next decade and beyond, the business should be able to register solid growth. That's because the payments landscape has been undergoing a secular shift away from cash and toward cashless transactions. In addition to higher spending across the economy, American Express will benefit from this trend.
American Express isn't a bargain opportunity
With shares trading 15% off their peak, investors are getting a better deal right now. American Express's price-to-earnings (P/E) ratio is 19.8. It's gotten 21% cheaper since the start of 2026.
But American Express is not a bargain opportunity. If it got down to a P/E of 15, it would be a no-brainer buy. If anything, the stock is fairly valued. Given that this is such a high-quality business, though, investors might still want to consider allocating some of their capital to American Express.
Should you buy stock in American Express right now?
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American Express is an advertising partner of Motley Fool Money. Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends American Express. The Motley Fool has a disclosure policy.
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