Here's What History Says Q4 Will Bring for American Express (AXP) Stock

In the world of finance, American Express (NYSE: AXP) is a unique operation. It not only issues cards to customers, taking on credit risk in the process, but it also runs the underlying payments platform that connects merchants and consumers. This is a closed-loop model that allows the business to capture more of the economics anytime its cards are used at checkout.

As of June 30, there were 155 million American Express cards in use in more than 200 countries around the globe, giving it massive reach. It's best known for the Platinum Card, which targets affluent consumers with an $895 annual fee that comes with valuable perks and rewards.

Even Warren Buffett has long been a fan of the company. Berkshire Hathaway owns 151.6 million shares, giving it a 22.5% stake in American Express. That's a major vote of confidence.

Prospective investors might be interested in adding the business to their portfolios. The financial stock trades 20% off its record from December 2025 (as of Oct. 14). But what will the fourth quarter bring? Here's what history says.

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Looking at every fourth quarter since 2020

This decade, the fourth quarter of each calendar year has rewarded investors with positive returns far more frequently than declines. During Q4 2021, the stock dipped 2%. That small blip was hardly a reason to panic.

In the fourth quarters of 2020 (+21%), 2022 (+10%), 2023 (+26%), and 2025 (+11%), American Express posted double-digit gains. During Q4 2024, the stock rose 9%, which was still a very respectable performance.

So far this month, shares have risen by just 1%. Looking at the data, however, history says that the payments stock could end this year on a high note. Past performance never guarantees future results, but that track record is hard to ignore.

Think in terms of years, not months

It can be challenging not to try to assess what a particular stock will do in the next few months. But these short-term price swings are impossible to predict. Weaker market sentiment, which can occur for any number of reasons, can send shares quickly lower.

These moves, however, have minimal impact on an outstanding company's long-term trajectory. The best investors always keep this in the back of their minds. Focus on the next five years and beyond. That's where the wealth is made.

With American Express, investors will find that the valuation is very attractive. The stock trades at a forward price-to-earnings ratio of 15.1. Compared to the S&P 500 index's multiple of 19.6, this is a notable 23% discount.

Just because a stock looks cheap, though, it doesn't automatically mean you should buy it. Investors must make sure this is a high-quality company.

With American Express, it starts with the wide economic moat. Its brand exudes status and trust that rival banks dream of, enabling the business to occasionally increase annual fees without disturbing new card additions. And the payments infrastructure supports a two-sided network effect that becomes more valuable to stakeholders as it gets bigger.

The moat shows up in the financial results. Revenue and net income both increased by 11% last quarter (Q2 ended June 30). These aren't flashy gains, but the consistency and durable is what matters.

Management expects the growth to continue. The long-term target calls for 10% (or more) revenue and mid-teens earnings per share (EPS) gains, respectively. Besides higher card fees and more card members, American Express sees each customer spend more over time.

Shareholders also benefit from ongoing stock buyback activity. The business reduced its diluted outstanding share count by 3% in the past 12 months, supporting EPS trends.

Viewed next to the valuation, these favorable traits make American Express a worthy investment candidate.

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 and Berkshire Hathaway. The Motley Fool has a disclosure policy.