Is American Express Stock Still Worth Buying After Earnings?

In what's now almost a given, American Express (NYSE: AXP) did well in its most recently reported quarter. Toward the end of April, it delivered another in a series of encouraging earnings reports, with both revenue and earnings improving at double-digit rates -- and beating analyst estimates in the process.

Still, investors were hesitant to pile into the stock, and since then it's lagged the bellwether S&P 500 index. I believe this presents a fine opportunity to buy shares of this excellent company at a discount. Here's why.

Image source: Getty Images.

Not good enough for Mr. Market

Those first-quarter numbers tell much of the story. Amex's total billed business rose by 10% year over year to a massive $428 billion, while revenue improved by 11% to $18.9 billion. Headline net income saw an even steeper climb, rising by 15% to $2.97 billion. That translates to a net margin of nearly 16%.

During the quarter, the Iran war began, and from that point, inflation began to tick higher -- mostly, though not exclusively, because of a surge in oil prices. Many American consumers became more hesitant and cautious in their spending, but this clearly didn't affect the credit card giant much.

On top of that, some investors continue to worry that artificial intelligence (AI) will disrupt the business of legacy financial services companies. Specifically, they fear AI agents will soon become experts at sniffing out the most advantageous transactions for consumers, in the process sidestepping the fees generated by credit card purchases.

While I think nearly every financial company will suffer collateral economic damage if the war continues, Amex has significant advantages that should insulate it more than most.

First, its cardholders tend to be more affluent, so even in times of unease, they'll probably be more willing to continue their spending ways. Second, Amex has done a fine job maintaining the cachet of its plastic, making its cards desirable to hold. And when people have a credit card, they tend to use it. Finally, Amex's vaunted rewards program remains the gold standard in the card world, and, as ever, it inspires customers to spend and earn perks.

As for those fears of AI disruption, the technology is sure to become ever "smarter" and more effective. However, I think the only way to avoid fees entirely is to bypass the credit card system, which means purchasing items through debit instruments. This, in turn, erases most of the advantages of holding credit cards in the first place, not least the ability to buy now and settle the balance later.

A powerhouse, as ever

Another factor in the market's lukewarm at best reaction to Amex's first quarter is management's guidance. It maintained its outlook of 9% to 10% revenue growth for this year over 2025, and earnings per share of $17.30 to $17.90 -- which would be at least a 12% improvement. This, despite the company's aim to boost spending on marketing and technology to keep the growth train running.

The typical Amex consumer is an eager buyer of goods and services, and I don't think macroeconomic gloom or advances in AI will change this pattern. I predict that Amex will continue to post double-digit growth and thrive as the unique, very successful business it is.

American Express is an advertising partner of Motley Fool Money. Eric Volkman 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.