American Express (AXP 0.59%) shareholders are finding their wallets a bit lighter at the start of the year, as the stock has declined approximately 29% from its 52-week high. Despite the credit services giant posting record financial results for 2024, concerns about the strength of the U.S. economy are weighing on the company's outlook.
Does this sell-off present a buy-the-dip opportunity, or does it foreshadow further declines? Let's explore where shares of American Express might be headed in one year.
NYSE: AXP
Key Data Points
The case for American Express stock heading lower
As one of the world's largest payments networks by transaction volume, American Express stands out from peers like Visa and Mastercard with its vertically integrated business model. By directly issuing credit and charge cards within a broader financial platform, the company has carved out a lucrative position catering to consumers and corporate clients with strong financial profiles and high-quality credit scores.
This strategic focus on the premium side of financial services is evident through industry-leading credit metrics, including low delinquency rates. In 2024, for the full year ended Dec. 31, total revenue net of interest expense climbed by 9% year over year, alongside an even stronger 19% increase in adjusted earnings per share (EPS). Company management noted record levels of card spending, fee revenue, and 13 million new card acquisitions.
However, even the best companies aren't immune to stock market turbulence in what has evolved into a rapidly changing macroeconomic backdrop. The latest development is the looming impact of reciprocal trade tariffs being implemented by the Trump administration on more than 60 countries. Framed as a push for economic fairness in international trade, tariffs could nevertheless cause near-term disruptions, including higher costs and inflation pressures, as supply chains adjust to the new fees on imports.
For American Express, the fallout from tariffs is likely indirect, depending on how consumer and corporate card usage evolves. By this measure, the risk for investors to balance is the possibility that economic conditions deteriorate, forcing a reassessment of American Express' growth and earnings trajectory to the downside.
If indicators of credit card default rates rise and labor market weakness persists, shares of American Express could fall further into 2026.
Image source: Getty Images.
A scenario where American Express rallies higher
While the stock market can be volatile and unpredictable in the short run, holding a diversified portfolio built with several high-quality companies is a proven approach to navigating through any market environment. In this case, American Express is a proven industry leader with a long history of overcoming economic challenges and rewarding shareholders. The business remains highly profitable with significant cash flows, and is well positioned to absorb any near-term shocks.
Following the large stock price sell-off, some of the worst-case outcomes may have already been priced into the market. This means that more favorable developments, including signs that credit card activity and the broader economy remain resilient, could be enough to help restore confidence in the company's outlook and kick-start a share price rebound.
American Express previously guided for 2025 revenue growth between 8% and 10%, with a 12% to 16% increase in adjusted EPS. Even if there is some downside now to those estimates, the silver lining is that the valuation has been rolled back to compelling levels. The stock is currently trading at 15 times its estimated 2025 EPS, well below the company's five-year average earnings multiple of closer to 18.
For investors who believe the current market storm will pass, shares of American Express may represent a bargain at the current level.
AXP PE Ratio (Forward) data by YCharts
My prediction for American Express stock
I'm cautiously bullish on American Express at the current level and predict its stock price will be higher by this time next year for three reasons, including:
- Its premium credit cards may insulate from a deep spending slowdown as its cardholders may be less likely to ditch luxury discretionary purchases.
- The valuation reset offers attractive value for its industry-leading fundamentals.
- If tariff disruptions prove overhyped and the U.S. economy steadies, American Express stock should lead a market rally.
For investors with a long time horizon, American Express stock is a great option for a diversified portfolio.
