💥 Is American Express Still a Buy After a 238% Five-Year Run?

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Hi Fellow Investors,

American Express has delivered exceptional long-term returns by consistently executing a premium-focused strategy in a competitive payments landscape.

The company’s ability to grow card membership, spending, and fees has fueled impressive shareholder value creation.

Looking ahead, valuation and growth sustainability will determine whether that success continues.

Key Points:

• American Express continues to expand by attracting new cardholders while steadily increasing spending per existing customer.

• The company has demonstrated meaningful pricing power by repeatedly raising annual card fees without materially impacting demand.

• Elevated valuation levels today could temper future returns despite ongoing earnings growth.

A premium franchise with durable growth ambitions

American Express (NYSE: AXP) has spent decades building a dominant position at the premium end of the global credit card market.

That positioning has translated into remarkable shareholder returns, with the stock generating a 238% total return over the past five years.

Management remains confident that the business can continue expanding at an attractive pace over the long term.

The company has outlined a goal of growing revenue at a compound annual rate of roughly 10%.

At the same time, diluted earnings per share are expected to increase at a mid-teens annual rate.

While future gains may not match the extraordinary performance of the past, the underlying business fundamentals remain compelling.

Cardholder expansion and higher spending drive revenue growth

A central pillar of American Express’ growth strategy is expanding its cardholder base.

Between the third quarter of 2020 and Q3 2025, the number of active cards rose by 36% to more than 151 million.

Encouragingly, much of this growth is coming from younger demographics.

Management has emphasized that Gen Z and millennial customers are highly engaged and increasingly loyal to the brand.

In addition to adding new customers, American Express is successfully driving higher spending per card.

Average spend per card reached $6,387 in Q3, representing a 58% increase over the past five years.

Pricing power reinforces the premium value proposition

American Express’ ability to raise prices without sacrificing demand remains a key competitive advantage.

The company has steadily increased annual fees across its premium card lineup.

The Gold card now carries a $325 annual fee, while the Platinum card was raised to $895.

As a result, the average fee per card has climbed 72% since Q3 2020.

This pricing power reflects the strength of the brand and the perceived value of its rewards and benefits.

Targeting higher-income customers also helps keep net charge-offs under control, which stood at just 1.9% in Q3.

Valuation could weigh on future returns

Strong performance in recent years has pushed American Express shares higher.

The stock is up 29% in 2025 alone, lifting the price-to-earnings ratio to approximately 25.7.

That multiple represents the highest valuation level the stock has seen in the past three years.

While earnings growth should continue to support the share price over time, multiple expansion may be limited.

Berkshire Hathaway’s 22% ownership underscores the company’s long-term quality.

However, elevated expectations could restrain market-beating performance over the next five years.

Strengths

• A powerful premium brand that resonates with affluent, high-spending customers and supports long-term loyalty.

• Demonstrated pricing power through consistent annual fee increases across flagship card products.

• Clear growth strategy centered on cardholder expansion and rising spend per account.

Weaknesses

• A rich valuation leaves limited room for disappointment if growth slows or macro conditions weaken.

• Exposure to consumer spending trends makes results sensitive to economic downturns.

• Premium positioning narrows the addressable market compared to mass-issuer competitors.

Potential

• Continued engagement from younger generations could support decades of incremental growth.

• Expanding global acceptance may further increase transaction volume and spending per card.

• Sustained earnings growth could drive steady long-term share price appreciation despite valuation headwinds.

Conclusion

American Express is well positioned to be a larger and more profitable company five years from now.

Its premium strategy, pricing power, and loyal customer base provide durable competitive advantages.

However, investors should temper expectations, as today’s valuation may limit relative outperformance.

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