New Price Targets Coming for American Express After Encouraging Update

On Friday morning, American Express (AXP) delivered September quarter results that were ahead of market expectations with the company also lifting its 2025 top-line guidance and tightening up bottom-line expectations toward the upper end of its prior forecast.

Management’s comments on the first few weeks of its Platinum card refresh are very encouraging and, given the influence net card fees on pre-tax income and EPS generation, we are likely to see others across Wall Street move their price targets closer to our $370 target. Coming into Friday morning’s report and updated outlook, the consensus price target for AXP shares was $335.

Because it is Friday, we may not see the follow-through on other price targets until early next week. Typically, that should give a little extra lift in the shares, but then again, in the current environment, weekend developments could influence market activity at the start of the week. For now, we’ll keep our Two rating intact for AXP shares, but should signs point to the Platinum refresh effort translating into more rapid card and fee growth, we’ll revisit our price target as needed.

September 2024 Quarter

Net card fee revenue rose 18% year over year, spurred on by an almost 4% increase in the number of cards in force and the more than 13% jump in average fee per card during the quarter. This confirms the thinking that more members are gravitating toward Amex’s premium cards, which carry more benefits and perks. Members also continued to spend more with their Amex cards, leading average member card spending to rise 4.5% year over year, holding steady on a sequential basis. Amex continued to repurchase shares during the quarter, a move that shrank its outstanding share count by 2% compared to the September 2024 quarter.

That was the recipe that led Amex to deliver EPS of $4.14, up 19% year over year, and well ahead of the $4.00 market consensus.

On September 18, we boosted our AXP target to $370 following Amex's revealing its much-anticipated Platinum card refresh. That effort, which included a number of new perks, carried a new annual membership fee of $895, up from $695. During the quarter’s earnings call, management shared some early data on how that refresh uptake is going, and it is encouraging. So far, the pace of new acquisitions is double what it was before the announced refresh, which bodes well for cards in force, average feed per card and related spending metrics.

Helping foster that, it seems Amex has delivered the perks that consumers, especially Millennials and Gen-Z, are looking for, sharing it has seen record high bookings on Amex Travel, Resy Restaurants, Lululemon (LULU) and Oura. As we have shared several times, when it comes to the Platinum card, the dollar value of the perks more than offsets the cost of membership.

Guidance

Amex lifted its 2025 EPS guidance to $15.20 to $15.50 compared to its prior forecast of $15.00 to $15.50, which bookends the $15.34 market consensus, and now pegs its top-line hitting $71.89 billion to $72.55 billion compared to the $71.58 billion consensus. As you might expect, we tend to see greater spending levels on Amex’s cards during the December quarter, and net card fees accounting for an even larger than usual percentage of the company’s pre-tax income.

Based on the initial comments for the Platinum card refresh, we should see the number of cards in force continue to climb, lifting the average fee per card as well. Let’s remember that as existing memberships renew at that higher card rate, the flow through should translate into a steady climb higher in average fee per card over the coming quarters. That should translate into higher pre-tax income and EPS as well.

Remember, we factored this back into our thinking back in mid-September when we increased our AXP price target. Odds are we will see some stragglers on Wall Street adjust their price targets given Amex’s initial refresh comments. As we move through the current quarter, and Amex management makes the eventual investor conference rounds, should indications point to the refresh effort paying off more than expected, it would be a reason for us to revisit our AXP target.

The other catalyst for such a move could be adoption rates for Amex Ads, Amex’s new digital advertising platform that helps brands connect with Amex’s U.S. consumer card membership. We suspect that, over time, Amex will roll that platform out to other markets as it aims to leverage the $530 billion in global Platinum franchise annual billings.

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At the time of publication, TheStreet Pro Portfolio was long AXP.