On September 29, when a caller inquired about American Express Company (NYSE:AXP), Mad Money host Jim Cramer stated:
I would buy more. Look, American Express is run by Steve Squeri. He has done a remarkable job. Periodically, it has these selloffs. People worry about credit issues… People worry about growth. The growth has been excellent. I think American Express is a great long-term play, but you have to think long term because right now we do not have a good situation with any company that’s involved in credit.
You can also read our piece on which stock is better to buy between Visa Inc. (NYSE:V) and American Express Company.
Operational Scale and Spend-Centric Network Moat
American Express Company operates a distinct closed-loop payments ecosystem that separates it from traditional consumer lenders. Rather than relying primarily on interest income from revolving loan balances, the company generates the majority of its revenue from merchant discount fees and annual cardmember fees. In the second quarter, discount revenue rose 9% year-over-year to $10.16 billion, while net card fee revenue grew 15% to $2.86 billion, marking 32 consecutive quarters of double-digit card fee expansion. Total billed business reached $455.8 billion during the quarter, supported by a 22% surge in global travel bookings.
Under CEO Steve Squeri, management has successfully expanded this moat into younger demographics, with Millennials and Gen Z accounting for 65% of new U.S. consumer account acquisitions. The generational adoption continues to drive steady transaction volume while maintaining exceptional credit metrics, including a 30-day delinquency rate of 1.2% and a net write-off rate of 2%, well below the default rates seen across general revolving card issuers.
Valuation Multiples, Credit Exposure, and Downside Risks
Trading at a forward price-to-earnings ratio near 15x, American Express Company has a premium valuation over traditional retail card lenders like Capital One and Synchrony Financial, which typically trade at single-digit earnings multiples. However, the stock trades at a noticeable discount relative to pure-play payment networks Visa and Mastercard, which fetch forward multiples of around 24x due to carrying zero credit risk on their balance sheets.
American Express reaffirmed its full-year 2026 earnings guidance of $17.3 to $17.9 per share on 10% revenue growth, supported by second-quarter diluted earnings of $4.53. While provisions for credit losses decreased 23% year-over-year to $1.08 billion due to strong portfolio health, balance sheet exposure to cardmember loans remains the primary downside risk. A broader macroeconomic downturn could trigger higher default provisions or slow discretionary travel spending, temporarily weighing on earnings performance.
Institutional Positioning and Market Sentiment
Institutional sentiment toward American Express Company remains solid. According to Insider Monkey’s data tracking over 1000 hedge funds, 85 hedge funds held long positions in the company, up from 83 funds in the prior quarter, led by Berkshire Hathaway as its largest shareholder with 151.6 million shares. Short-seller activity remains minimal, with short interest sitting at 2.06% of the public float.
Moreover, Federal Reserve stress tests confirmed American Express Company’s structural balance sheet strength, projecting the lowest credit card loss rate among major U.S. bank holding companies under severely adverse economic scenarios. These factors support Cramer’s view that short-term market fears over broader consumer credit quality create compelling entry points for patient investors.
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