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American Express (AXP): The Best Bet for Digital Payment Innovations?

Ramish Cheema
·4-min read

The digital payments industry is quite lucrative. It stands right at the cusp of a consumer's economic interaction, allowing digital payments firms to take a commission from almost all transactions that they process. This means that as long as the economy grows, digital payments firms are able to grow their transaction volumes provided all other things remain equal. To understand this, a brief look at the performance of the Nasdaq CTA Global Digital Payments Index can help. The index lost more than 20% when American and global consumers were feeling the inflationary and interest rate pinch. But since October, it has gained quite a bit, as the economic clouds turn gray from black.

Due to this dynamism, we decided to take a look at the recent performance of American Express Company (NYSE:AXP) as part of our list of the 10 Best Digital Payments Stocks To Buy Now. American Express Company (NYSE:AXP) is not the best digital payment stock according to the methodology of this list, it still ranks 5th. Therefore, the stock merits a sharper look at some recent financial performance, hedge fund sentiment and analyst ratings.

American Express Company (NYSE:AXP)

American Express Company (NYSE:AXP) needs no introduction when it comes to digital payments. It is one of the first providers of card based payments in America, and over the years, has grown to have a market capitalization of $169 billion. Apart from its payment cards, American Express Company (NYSE:AXP) also offers travel services.

American Express Company (NYSE:AXP)'s recent financial performance:

American Express Company (NYSE:AXP)'s latest financial results cover its performance during the first quarter of 2024. These saw the firm post $3.33 in adjusted earnings per share estimates. These flew past analyst estimates of $2.95. On the revenue front, American Express Company (NYSE:AXP) raked in $15.8 billion in revenue, which saw it add $1.5 billion in sales over the year ago quarter and meet analyst expectations. During the earnings call, management commented on GenZ and Millennial spending, outlining that they:

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". . . grew their spending 15% and continued to drive our highest billed business growth within this segment. In fact, we see that younger customers use their cards more overall and this is even more pronounced in certain spend categories."

American Express Company (NYSE:AXP) and hedge funds:

Shifting towards hedge funds, 66 funds part of Insider Monkey's database had bought American Express Company (NYSE:AXP)'s shares during Q1 2024. This marked an increase of two, despite the fact that total funds that we analyzed dropped from 933 during Q4 2023 to 919 in the previous quarter. The monetary value of these stakes also grew by the billions, with the funds having piled in $38 billion in American Express Company (NYSE:AXP) as of March 2024 end. Out of the $38 billion, $34 billion was held by Warren Buffett's Berkshire Hathaway.

What Do Analysts Say About American Express Company (NYSE:AXP)?

As for the analysts, the average of 23 one year American Express Company (NYSE:AXP) share price targets is $232 and the average share rating is Buy. RBC and Wells Fargo have rated the stock as Outperform and Overweight, respectively. Out of these, RBC's latest note for American Express Company (NYSE:AXP) came out in May 2024. It saw the firm reiterate the Outperform rating and increase the digital payments firm's share price target to $263 from $253.

So, Is American Express Company (NYSE:AXP) the Best Digital Payments Stock?

Being one of the few stocks that Warren Buffett has invested in has to be a great indicator of whether it is the 'best' stock or not. When it comes to other digital payments providers, American Express Company (NYSE:AXP) enjoys an advantage since it targets the premium end of the market. This allows it to somewhat insulate itself against economic downturns reducing payment volumes. With an investment from Warren Buffett and a specialized business model, seems like American Express Company (NYSE:AXP) has got it all. The stock trades at a forward PE ratio of less than 19 despite the fact that it managed to grow its revenue by 65% over the last 3 years. Additionally, American Express aims for mid-teens earnings per share (EPS) growth, reflecting its ability to enhance profitability through efficient cost management and revenue expansion.

However, it ranked 6th on our list of the best digital payments stocks. Click to see the 10 Best Digital Payments Stocks To Buy Now.

If you are looking for an AI stock that is as promising as American Express but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.

Disclosure: None. This article is originally published at Insider Monkey.