American Express (NYSE:AXP) ranks first on our list of the 10 best stocks to buy according to billionaire Mario Gabelli’s fund. The stock is down about 17% so far this year. That begs the question: is this the time to buy the stock on the dip?
Valuation
American Express trades at a forward P/E of about 17.3. Analyst consensus has American Express growing earnings per share about 15% in 2026 and about 14% in 2027. The market’s earnings grow about 10% a year over the long run. So American Express has a lower multiple and faster growth than the market. If earnings grow 14% a year, the P/E falls to about 13 in two years and under 12 in three. A bullish thesis from a Reddit value investor also centers on the stock’s valuation. See the bulls’ case here.
Can Amex Keep Growing Earnings at This Pace?
The recent numbers say yes. Earnings per share rose 14% in the first half, and revenue has grown at a double-digit rate for four straight quarters. Card Member spending rose 9% in the second quarter, the fastest FX-adjusted pace in three years. The net write-off rate was 2.0% and flat from a year ago, so credit losses are not eating into profit. Management guides to 10% revenue growth for 2026, and analysts expect about 9% in 2027. SGA Global Growth Strategy bought the stock in the first quarter and said operating leverage should deliver mid-teen earnings growth over time, even if revenue growth slows. See why SGA thinks the AI scare around card spending is overblown.
Photo by AlphaTradeZone
Why Rich Customers Keep Paying Amex
American Express has a durable edge with wealthy customers because they pay high annual fees and stay for the travel, dining and shopping benefits. That makes fee income grow even when spending cools. Net card fees have grown about 17% a year for seven years. The refreshed Platinum Card is bringing in new premium customers, and partnerships with Delta, Fanatics and Accor keep adding to the network. The company also pays shareholders well. It cut its share count about 3% over the past year, raised its dividend 58% over three years and returned about three-quarters of its net income to shareholders over that time. Giverny Capital Asset Management also added the stock as a new position in the first quarter. See what Giverny said about American Express.
What Could Go Wrong
The biggest risk is a recession. American Express sets aside a large amount for credit losses each quarter, and write-offs rose far above today’s 2% level during the 2008 financial crisis. Regulation is the second risk. Government limits on credit card fees would hit the high-margin fee business that drives the bull case. High interest rates could keep the multiple low even if earnings keep growing, with the 10-year Treasury yield near 5.2%. If earnings growth slips toward the market’s 10%, the discount to the S&P 500 stops looking like a bargain.
While we acknowledge the risk and potential of AMX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMX and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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