New American Express Price Target With Platinum Card Refresh Going Well
Management reaffirmed its commitment to the premium space.
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Yesterday, American Express (AXP) CFO Christophe Y. Le Caillec presented at the KBW Fintech Payments Conference. He shared upbeat comments about consumer spending in October, but more central to our AXP investment theme, the Platinum Card refresh is going very well. With that in hand, we are nudging our AXP price target to $385 from $370.
Supporting Le Caillec's comment about October spending, this morning we received Visa’s (V) U.S. Spending Momentum Index (SMI), which showed an increase in discretionary spending during the month despite the government shutdown. Mitigating that increase, Visa noted sequential declines in non-discretionary and restaurant categories. Still, the takeaway is that spending rose compared to September.
Getting back to Le Caillec and his comments, the CFO also reaffirmed Amex’s 2025 EPS guidance of $15.20-$15.50 with revenue rising 9%-10% for this year. That guidance also bakes in a full quarter of expenses tied to the Platinum Card refresh compared to just two weeks in the September quarter.
During the presentation, Le Caillec also discussed how Amex is leveraging technology to drive costs lower as well as how its redesigned app is helping cross marketing of other products. One shared example was the increased uptake of Amex’s high-yield savings account with card members.
Le Caillec also discussed the Buy Now, Pay Later landscape, and explained why Amex is not inclined to offer that service. The reason is two-fold. First, Amex already offers a Plan It feature that allows a member to stretch a payment out across 3, 6, or 9 months. Second, and this speaks more to how we view Amex, because the company’s largest franchise is Platinum, it focuses on the premium space. With the benefit of hindsight, that focus intensified after its relationship with Costco (COST) ended in mid-2016.
While Amex could expand beyond the premium space to help foster even greater growth, Le Caillec pointed out the management team isn’t inclined to do that, given potential credit and earnings risk. We like that discipline and focus for obvious reasons, but we also recognize the key to Amex’s earnings power is the one-two punch of expanding its membership and driving its average fee per card higher. It’s not going to do that by catering to consumers living paycheck to paycheck.
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At the time of publication, TheStreet Pro Portfolio was long AXP and COST.
