American Express Is a Stock You Want to Own in 2025

Key Points

• American Express outperformed in Q1 and reaffirmed its guidance, highlighting a resilient client base and high-quality operations.
• Cash flow is robust, allowing for aggressive buybacks and a healthy dividend. 
• Analysts and institutional trends suggest that the rebound could begin in Q2 or early Q3, adding 20% to the stock price by year's end.

American Express NYSE: AXP is a stock you want to own in 2025 because its high-quality, tariff-resistant financial services business outperforms, guidance is solid, and the stock is cheap. The stock price corrected by roughly 30% in Q1 and early Q2, providing a value opportunity that analysts and institutional activity highlight.

Analysts' trends are firm. Although the consensus price target fell modestly in early Q2, the trends include increasing coverage, a bullish bias to the Hold rating, and a forecast for 20% upside from the critical support level. That level aligns with lows set in 2024, which already produced one robust rebound this year. The analysts' activity following the Q1 earnings release aligns with these trends, suggesting that the market decline is stabilizing. 

The post-release analyst activity includes a price target reduction, offset by numerous price target increases, averaging $275. That is below MarketBeat’s reported consensus of $290, but is still a solid 15% increase for this outperforming business. Regarding the institutions, they own about 85% of the stock and ramped their buying to a multi-year high in the first half of 2025 as the stock price retreated. 

Resilient Client Base Supports Business for High-Quality Operation

American Express’s Q1 results highlight the resilience of its more-affluent client base and the quality of its operations. The business grew by 7.4% on a reported basis, modestly above forecasts, and 9% adjusted for Leap Year on strength in all metrics. The company reported an 11% increase in net investment income (NII), a 7% rise in client spending, higher loan balances, and an 18% increase in fees. Net clients and cards are also up modestly. 

Margin is an area of strength. The company experienced cost increases but was able to manage them, providing modest leverage on the bottom line, including the impact of share repurchases. GAAP earnings grew by 9% to outpace the consensus by nearly 500 basis points, aided by a 3% share reduction. The company is wary of potential business disruption, but so far, it has seen little impact and has left its guidance unchanged.

Guidance for 2025 forecasts 8% to 10% revenue growth and earnings ranging from $15 to $15.25, slightly below the consensus but sufficient to sustain the balance sheet health and capital return. 

American Express Dividend Growth on the Express Track

American Express’s dividend yield isn’t all that impressive, but it aligns with the broad market average, and its distribution is growing. The company has increased the distribution at an impressive 17% CAGR over the last few years and can sustain a double-digit pace in 2025 and 2026. The payout ratio is below 25%, and the cash flow is unencumbered, leaving room in the numbers even without earnings growth. 

The company carries some debt, but leverage is low at 1.6x, and the balance sheet is well-capitalized. Regarding shareholder value, the company increased equity by 3% sequentially and 8% year-over-year in Q1 and will likely continue to build equity at a similar pace as the year progresses. 

The price action in American Express, along with the broad market, hit bottom in early April. It consolidates at low levels later in the month, which is critical because it sets up a rebound that could easily reclaim the current all-time high. Any weakness driven by tariffs and the economic headwinds they cause is unlikely to be felt by this or the average business significantly until the year's second half.

In this scenario, strong second-quarter results from other S&P 500 companies could fuel optimism and boost the likelihood of a summer market rally.