American Express: Staying Away from This Buffett Stock After Q1 Results

Company Update (AXP US) (Neutral)

Highlights

• AXP P/E is 16x despite guidance for double-digit EPS growth

• Q1 volume and revenues were up double-digits year-on-year

• But variable costs rose again, including in the Delta co-brand

• Credit costs are normalizing upwards; pre-tax profit fell 20%

• We believe AXP’s business model is challenged. Avoid

Introduction

We review American Express (AXP), where we have a Neutral rating, after Q1 2023 results last Thursday (April 20).

AXP shares have fallen another 2.6% since Q1 results, and the share price is now 13% lower than a year ago:

AXP Share Price (Last 1 Year)

Source: Google Finance (24-Apr-23).

AXP is a well-known long-time Warren Buffett holding, with Berkshire Hathaway owning an 18% stake (purchased in the 1990s) that was valued at $22.4bn as of 2022 year-end.

We have followed AXP and other Payments stocks for nearly a decade, and started publishing our research publicly since 2019. We have had a Neutral rating on AXP since 2019, and Buy ratings on Mastercard and Visa. (We will be coverin…