American Express: Volume Recovering But Costs Rising Faster In Q3
(Preview) Company Update (AXP US) (Neutral)
Summary
AXP stock rose 5.4% on Friday after Q3 2021 results, but we see evidence of structural issues beneath the strong headlines.
Even with volumes now exceeding 2019 levels, pre-provision pre-tax income remained 28% below, and fell 3% from Q2 2021.
Lower profits were due to structurally higher costs, mainly in customer engagement costs and marketing, the result of rising competition.
Net Interest Income can stay weak due to lower loan balance and yield, and Buy Now Pay Later is a threat to AXP.
AXP stock is now trading at more than 20x 2022 EPS, and the post-2022 EPS outlook may be cut to allow more investments. Avoid.
Introduction: Why is AXP Stock Up?
American Express stock rose 5.4% on Friday (October 24) after the company released Q3 2021 results.
We initiated our Neutral rating on AXP in March 2019. Since then shares have gained 72.7% (including dividends), with the bulk of the gain occurring in 2021 year-to-date (when AXP stock gained 55.8%). AXP share price has now outperformed thos…