Jim Cramer Advocates for American Express as Long-Term Buy
Jim Cramer, host of Mad Money, recently endorsed American Express (NYSE: AXP) as a strong long-term investment despite ongoing concerns about credit risks. During a show on September 29, Cramer advised buying more shares of AXP, highlighting CEO Steve Squeri's leadership and the company's consistent growth. He acknowledged that periodic selloffs occur due to worries about credit issues and growth, but emphasized that AXP's performance has been excellent under Squeri's management.
American Express operates a unique closed-loop payments ecosystem, generating most of its revenue from merchant discount fees and cardmember fees rather than interest income. In the second quarter, discount revenue increased 9% year-over-year to $10.16 billion, while net card fee revenue grew 15% to $2.86 billion. The company's total billed business reached $455.8 billion, driven by a 22% surge in global travel bookings. AXP has successfully expanded its customer base to younger demographics, with Millennials and Gen Z making up 65% of new U.S. consumer account acquisitions.
The company's credit metrics remain strong, with a 30-day delinquency rate of 1.2% and a net write-off rate of 2%, well below industry averages. Trading at a forward price-to-earnings ratio of around 15x, AXP has a premium valuation compared to traditional card lenders but trades at a discount relative to Visa and Mastercard. The company reaffirmed its full-year 2026 earnings guidance of $17.3 to $17.9 per share, supported by 10% revenue growth and a 23% year-over-year decrease in provisions for credit losses.
Institutional sentiment toward AXP remains solid, with 85 hedge funds holding long positions, up from 83 in the prior quarter. Berkshire Hathaway is the largest shareholder, holding 151.6 million shares. Short interest is minimal at 2.06% of the public float. Federal Reserve stress tests confirmed AXP's structural balance sheet strength, projecting the lowest credit card loss rate among major U.S. bank holding companies under adverse economic scenarios.