American Express (AXP 1.34%) -- standing at $232 billion in market value -- is a top Berkshire Hathaway holding, and has been a great investment in the past. The shares have generated a total return of 177% over the last five years (as of Feb. 16). There's no reason to believe that from a fundamental perspective, the company can't keep its momentum going.
Here are three predictions for the dominant credit card business in 2026.
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Catering to younger consumers
American Express is an old financial institution. Its customer base, however, is starting to make the company look younger. During the fourth quarter of last year, 65% of new cards came from the Millennial and Gen Z demographic.
"As of Q4, Millennial and Gen Z customers now make up the largest share of U.S. consumer spending, and they remain the fastest-growing cohorts," CFO Christophe Le Caillec said on the Q4 2025 earnings call. I expect this trend to continue in 2026.
This can prove to be a major tailwind for the business. Over time, these customers should see their incomes rise and their spending power grow. The result is more payment activity running on the Amex network.
Strong financial performance
Over the past five years, American Express saw its revenue (net of interest expense) increase by 100%. Diluted earnings per share (EPS) rose by 308% due to an easy comparison to depressed profits in 2020. Nonetheless, the company has been operating from a position of fundamental strength.
Assuming the global economy doesn't experience extreme recessionary forces, the good times should continue for Amex. Management expects 9% to 10% revenue growth in 2026. And their forecast calls for EPS to grow 14% (at the midpoint) this year.
As has been the case historically, the company shouldn't have any problem growing its base of cardholders. Valuing the perks that come from being an American Express member, these people spend more over time, while also accepting the higher fees that are charged.
NYSE: AXP
Key Data Points
The stock's performance is unknown
This is a high-quality business. That doesn't mean investors should go out and immediately buy the stock. It's important that the valuation isn't ignored.
As of this writing, Amex stock trades at a price-to-earnings (P/E) ratio of 21.9. This is about 20% more expensive than exactly three years ago. This elevated valuation means that the near-term upside could be limited. At least that's true compared to a situation in which the P/E multiple today was much lower.
In 2022, the stock fell by 10%. In each of the last three years, however, shares posted phenomenal double-digit gains. It wouldn't be surprising to see American Express take a breather and have a down year in 2026.
