Should I buy American Express after strong Q1 results?

American Express Company (NYSE: AXP) shares have advanced from $164.51 above $199 since the beginning of January 2022, and the current price stands around $180.54.

This Friday, American Express reported better than expected first-quarter results and announced that it expects 18 to 20 percent revenue growth for the 2022 fiscal year.

American Express added 3 million new proprietary cards in the first quarter

American Express is an American multinational financial services corporation that operates in credit card and traveler’s cheque businesses.

The company reported better than expected first-quarter results this Friday; total revenue has increased by 29.5% Y/Y to $11.73 billion, while the GAAP earnings per share were $2.73 (beats by $0.28).

First-quarter results reflect continued momentum in core business in areas, including customer acquisition, engagement, and retention, as well as outstanding credit performance.

New proprietary card acquisitions reached three million in the first quarter while customer retention remains at the very high levels.

Consumer platinum, gold, and business platinum cards reached all-time highs for the quarter, driven by strength in consumer travel.

Travel and entertainment spending rose 121% Y/Y and reached pre-pandemic levels for the first time in March.

Total revenue has increased above the expectations (+70 million) in the first quarter of 2022, and according to the company’s management,  American Express will have revenue growth and margin expansion in the upcoming quarters. American Express CEO Steve Squeri, said:

First-quarter results are in line with our expectations for the full year, and we are reaffirming our full-year guidance of 18 to 20 percent revenue growth and earnings per share between $9.25 and $9.65 vs. the consensus of $9.73.

American Express continues to extend relationships with various companies, which is a major contributor to its success across all business areas.

It is also important to mention that the company’s management is accelerating a focus on fintechs to drive more innovation, which will enable fintechs to more seamlessly and quickly issue new products on the American Express network.

American Express’s outlook remains stable, but with a market capitalization of $142 billion, shares of this company are not undervalued.

The current dividend yield is around 1.15%; the stock is trading at more than eighteen time-guided 2022 EPS, which is not enough to compensate for its long-term business risks.

J.P. Morgan analyst Richard Shane lowered price target multiples on consumer finance companies by 18%, on average, due to economic uncertainty and the increased probability of recession. Richard Shane downgraded American Express shares to Neutral from Overweight and pointed out that the current valuation already reflects a relatively positive base case.

Bulls control the price for nowData source: tradingview.com

The important support level stands at $170, while $200 represents the strong resistance level. If the price falls below $170, it would be a firm “sell” signal, and we have the open way to $160 or even below.

On the other side, if the price jumps above $200, the next target could be at $210.

Summary

American Express reported better than expected first-quarter results this Friday and announced that it expects full-year guidance of 18 to 20 percent revenue growth. American Express added 3 million new proprietary cards in the first quarter and continues to extend relationships with a variety of companies.

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