American Express’s SWOT analysis: premium card giant faces growth hurdles

Published 22/09/2025, 17:18
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American Express (NYSE:AXP), the integrated payments company known for its premium credit cards, finds itself at a crossroads as it navigates economic uncertainties while striving to maintain its market position and meet ambitious growth targets. With a market capitalization of $239.62 billion and trading near its 52-week high of $344.36, InvestingPro data shows the company maintains a GOOD overall financial health score of 3.0. Recent analyst reports and financial data paint a picture of a company with strong fundamentals but facing headwinds that could challenge its trajectory in the coming years.

Business Performance and Market Position

American Express has maintained a stable loan growth rate of approximately 10% year-over-year, demonstrating the company’s ability to expand its lending activities even in a challenging economic environment. According to InvestingPro data, the company’s revenue growth stands at 9.17% over the last twelve months, with a robust gross profit margin of 64.25%. These metrics, along with 11 additional exclusive ProTips, are available to InvestingPro subscribers. The most recent data from March 2025 showed total loan growth at 10.4%, consistent with the previous month’s 10.3% growth rate. This stability in loan growth suggests that American Express continues to attract and retain customers, particularly in its core premium segment.

The company’s credit performance has shown mixed results. Net charge-offs (NCOs) and delinquencies (DQs) have generally outperformed analysts’ estimates, indicating effective risk management. However, there have been some fluctuations, with NCOs occasionally missing expectations. For instance, in February 2025, NCOs fell short of Barclays’ projections, while DQs remained in line with predictions. The preliminary first-quarter 2025 US Card NCOs were reported at 2.4%, slightly higher than the Street’s consolidated NCO forecast of 2.37% for the same period.

Strategic Initiatives and Product Enhancements

American Express has been proactive in enhancing its product offerings to maintain its competitive edge. On September 18, 2025, the company announced significant updates to its Platinum card, introducing new features and benefits. These additions include credits for Resy, digital entertainment, lululemon, and Oura Ring, as well as expanded travel credits and points. This move is seen as a strategic effort to reinforce the value proposition of AXP’s ultra-premium card offering and to attract and retain high-value customers.

The focus on premium cardholders is a key strength for American Express. Analysts believe that this premium customer base provides resilience against potential macroeconomic weaknesses. The company’s exposure to discretionary spending sectors like travel and entertainment, however, makes it more vulnerable during economic downturns compared to competitors such as Visa and Mastercard.

Financial Outlook and Analyst Projections

Analysts have provided varying projections for American Express’s financial performance. BofA Global Research projects total revenue to grow from $60,515 million in 2023 to $83,124 million in 2027. Operating earnings per share are expected to increase from $11.21 in 2023 to $20.05 in 2027, with growth rates ranging from 13.9% in 2024 to 17.1% by 2027.

Despite these positive projections, some analysts express concerns about American Express’s ability to achieve its mid-term revenue growth target of over 10%. Redburn Atlantic, for instance, has adjusted its estimates, with profit before tax forecasts for FY25-FY27 lowered by 1-4% due to expected lower volumes and higher credit provisioning.

American Express has maintained its guidance for 2025, projecting revenue growth of 8% to 10% and EPS growth aligned with its long-term goal of mid-teens growth. This consistency in guidance, even in the face of economic uncertainties, has been viewed positively by some analysts as a sign of the company’s confidence in its business model and strategy.

Macroeconomic Factors and Market Dynamics

The broader economic environment plays a crucial role in American Express’s performance. The company’s stock has experienced significant volatility, with a reported decline of over 25% from its January 2025 high. This underperformance relative to the S&P 500 and the S&P 500 Banks indices has been attributed to concerns about tariffs affecting the US economy and their potential impact on discretionary spending.

Consumer spending trends remain a key focus for investors and analysts. While American Express has reported stable core billings trends, there are concerns about the potential for reduced spending in travel and entertainment sectors during economic slowdowns. The company’s ability to manage expenses, particularly rewards costs tied to card member spending, has been highlighted as a potential mitigating factor against these risks.

Competitive Landscape

American Express operates in a highly competitive industry, facing challenges from traditional rivals like Visa and Mastercard, as well as emerging fintech companies. The company’s integrated business model, which combines card issuing, payment network, and merchant acquiring functions, provides a unique position in the market. However, this model also exposes American Express to risks across multiple segments of the payments value chain.

The focus on premium customers has been a differentiating factor for American Express. This strategy has helped the company maintain a strong market position and potentially provides more resilience during economic downturns. However, it also means that American Express may be more sensitive to changes in high-end consumer behavior and spending patterns.

Bear Case

Is American Express overvalued at current levels?

Some analysts have expressed concerns about American Express’s valuation. The company’s stock price has at times exceeded analyst price targets, suggesting potential overvaluation. For example, Barclays’ price target of $249 was below the stock price of $251.31 as of April 17, 2025. This discrepancy raises questions about whether the market has fully priced in the risks and challenges facing the company.

Additionally, the significant stock price decline from January 2025 highs indicates that investors may be reassessing the company’s growth prospects and resilience in the face of economic headwinds. The premium valuation that American Express has historically commanded may be harder to justify if revenue and earnings growth rates fail to meet expectations.

Can AXP maintain growth if consumer spending slows?

American Express’s exposure to discretionary spending sectors like travel and entertainment makes it vulnerable to economic downturns. Historical trends suggest that the company could experience greater volume declines during recessions compared to its competitors. If consumer spending slows significantly, particularly in these high-margin sectors, American Express may struggle to achieve its targeted growth rates.

Moreover, the company’s ability to meet its mid-term revenue growth target of over 10% has been questioned by some analysts. A prolonged period of reduced consumer spending could make this target increasingly difficult to achieve, potentially leading to downward revisions in earnings estimates and a reassessment of the company’s growth trajectory.

Bull Case

How resilient is AXP’s premium customer base?

American Express’s focus on premium cardholders is seen as a key strength that could help the company navigate through potential macroeconomic weaknesses. The premium customer base typically has higher spending power and may be less affected by economic fluctuations. This could provide American Express with a buffer against broader economic downturns.

Furthermore, the company’s recent enhancements to its Platinum card benefits demonstrate a commitment to maintaining and expanding its premium customer base. If these initiatives prove successful in attracting and retaining high-value customers, American Express could outperform expectations even in a challenging economic environment.

Could expense flexibility drive earnings outperformance?

American Express has emphasized its ability to manage expenses flexibly, particularly regarding rewards costs tied to card member spending. A significant portion of the company’s costs (56% related to customer expenses) are variable, offering a natural hedge against reduced spending. This flexibility could allow American Express to protect its margins and potentially exceed earnings expectations even if revenue growth slows.

Additionally, the company’s integrated business model provides multiple levers for cost management and revenue optimization. If American Express can effectively leverage this model to drive operational efficiencies and capitalize on cross-selling opportunities, it could lead to better-than-expected financial performance.

SWOT Analysis

Strengths:

  • Premium customer base with higher spending power
  • Integrated business model (card issuer, payment network, merchant acquirer)
  • Strong brand recognition and loyalty
  • Flexible expense management capabilities

Weaknesses:

  • Higher exposure to discretionary spending sectors (travel, entertainment)
  • Potential overreliance on premium market segment
  • Higher costs associated with premium rewards programs

Opportunities:

  • Expansion of digital and mobile payment solutions
  • Growth in international markets
  • Development of new financial products and services
  • Partnerships with emerging fintech companies

Threats:

  • Economic downturns affecting consumer spending
  • Intensifying competition in the premium card market
  • Regulatory changes in the financial services industry
  • Technological disruption in the payments sector

Analyst Targets

  • Redburn Atlantic: $255 (April 23, 2025)
  • RBC Capital Markets: $310 (April 21, 2025)
  • Barclays: $249 (April 21, 2025)
  • BofA Global Research: Buy (no price target, April 11, 2025)
  • Barclays: $280 (March 18, 2025)

American Express continues to navigate a complex financial landscape, balancing its strengths in the premium card market against economic uncertainties and competitive pressures. While the company faces challenges in meeting ambitious growth targets, its strategic initiatives and flexible business model provide potential avenues for resilience and growth. InvestingPro reveals the company’s strong financial foundation with a current ratio of 1.6 and an impressive 55-year track record of maintaining dividend payments. For deeper insights into AXP’s financial health and growth potential, explore our comprehensive Pro Research Report, part of our coverage of 1,400+ top US stocks. Investors and analysts will be closely watching American Express’s performance in the coming quarters to assess its ability to execute on its strategy and maintain its position as a leader in the payments industry.

This analysis is based on information available up to September 22, 2025, and reflects the views and projections of various financial analysts and institutions as of that date.

InvestingPro: Smarter Decisions, Better Returns

Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on AXP. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore AXP’s full potential at InvestingPro.

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