American Express (AXP) has recently distinguished itself as a standout example of operational and strategic execution amid a demanding macroeconomic backdrop. The company continues to capitalize on its affluent, high-credit-quality customer base, enabling it to preserve best-in-class credit metrics even as broader consumer conditions remain uneven.
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Additionally, a well-timed and thoughtfully executed product refresh has driven record levels of cardmember engagement and spending, reinforcing the franchise’s strength. Coupled with a still-favorable interest-rate environment that supports net interest margins, these factors create a compelling setup. Taken together, I believe American Express is well-positioned for sustained earnings momentum and stock outperformance next year.
Credit Conditions Working in AXP’s Favor
AmEx has been almost boringly consistent on credit this year. Delinquency rates have sat around 1.3% for several quarters, with write-off rates relatively stable and still below pre-COVID levels. CEO Stephen Squeri last week reminded investors at the Goldman Sachs U.S. Financial Services Conference that AmEx has been the only major issuer whose card losses have remained well below pre-pandemic norms over the last few years.
The catalyst for that success is the deliberate “premiumization” of the book following the 2016 separation from Costco. Today, about 70% of new consumer cards are fee-paying, and the cohorts are unusually powerful. In fact, AmEx’s Millennial and Gen-Z cardholders show delinquency rates 40% lower than the industry’s Gen-X and baby-boomer averages. This indicates that the company is relying more heavily on customers who both use the card more (as younger cardmembers transact about 25% more often and consolidate more of their spending) and behave more favorably in a downturn.
Another noteworthy fact is that half of the net interest income growth since 2019 has come from margin expansion rather than from balance expansion alone. It was aided by a shift in funding toward high-yield savings (~2/3 of balances now, versus ~1/3 in 2017) and improved pricing. With the Fed now cutting, that funding base should gradually cheapen while the yield on premium lending remains resilient. I believe this will provide a structural tailwind for spreads at a time when many lenders remain concerned about credit costs.
Why 2026 Looks Robust
Management’s message in both the November KBW conference and the December Goldman session was essentially that Q3’s acceleration is holding. Cardmember spending growth stepped up by roughly 200 basis points in Q3, to around 8.5% billings growth, and CFO Christophe Le Caillec pointed to investors that October billings were “very much similar” to Q3 across segments and geographies. Squeri added that early holiday-season spending, defined as the week before Thanksgiving through Cyber Monday, increased by 9% in U.S. consumer retail and 13% in U.S. consumer Platinum retail.
All of that suggests that in Q4 we will see improved discount revenue from more spending, higher fee income as the U.S. Platinum refresh rolls through, and more net interest income as affluent customers selectively use “Pay Over Time” and Plan It instalments. Crucially, credit quality has not forced them to trade growth for safety; provisions have been growing, but not to the extent that they overwhelm top-line gains, which is why Q3 EPS grew almost twice as fast as revenue.
Looking into 2026, the setup could arguably be even better. The Platinum refresh is only just starting to fully impact the P&L as existing cardmembers roll through their anniversary dates. Upgrades historically run at roughly twice the number of downgrades in a “normal” year, rising to approximately 2.5x around a refresh.
If you combine that with management’s focus on agentic commerce and AI-driven efficiency, where Le Caillec sees a clear path to mid-teens EPS growth through productivity gains, and you see a business that should cross 2026 with more fee revenue, better spreads, and a leaner cost base than it has today.
Paying 22x for Long-Term Compounding
At about the high-$380s, American Express trades on roughly 24x 2025 consensus EPS of $15.49, or at 22x the 2026 consensus EPS of $17.45. With most of 2025 behind, next year’s estimate makes for a fairer multiple to assess the stock, and frankly, it’s not a rich one given AmEx’s qualities and growth outlook. Specifically, Wall Street projects low double-digit annual EPS growth, approximately 11–12% per year, through at least 2029.
So the question is not whether AmEx is “cheap” in absolute terms but whether the market is overpaying for a story that might fade. My view is that the market is essentially paying for the base case (10%+ revenue growth, mid-teens EPS, strong credit) and giving little to no credit for the positive boost from lower rates and the premium portfolio. The still-early Platinum refresh also feels overlooked.
Therefore, for a business that has repeatedly hit its algorithm and sits in the top quartile of the S&P on both revenue and EPS growth, that feels like an attractive entry point, especially if you believe that AmEx can perform better than the base case.
Is AXP a Good Stock to Buy Now?
On Wall Street, AXP stock surprisingly features a Hold consensus rating, based on seven Buy, 14 Hold, and two Sell ratings. This is despite industry-leading metrics and grounded valuation. In fact, AmEx’s average stock price target of $350.25 implies 8% downside potential over the next 12 months.
AXP in Position to Compound Through the Cycle
In summary, I view American Express as exceptionally well-positioned to navigate the current rate-cutting cycle with advantages that few peers can match. The company enters this phase with a demonstrably stronger credit profile, supported by its premium customer base, as well as multiple, durable levers to drive growth across spending, fees, and engagement.
Importantly, these strengths are available at a valuation that remains reasonable for a business with consistent compounding characteristics. Until there is clear evidence of deterioration in credit quality or a breakdown in management’s ability to deliver its targeted ~10% revenue growth and mid-teens EPS growth, I am comfortable maintaining a long position in AXP.