We recently published a list of Jim Cramer is Talking About These 10 Stocks. In this article, we are going to take a look at where American Express Company (NYSE:AXP) stands against other stocks Jim Cramer is talking about.
Jim Cramer in a latest program on CNBC said that the market is narrowing again as he sees gains getting concentrated in big tech stocks again amid bond movements.
“If the bond market doesn’t start behaving and calming down, and long-term interest rates don’t stop going up, we are gonna start losing the groups that led us higher for months and go back to our bad old ways with just a couple of magnificent ones.”
Jim Cramer said that this trend was more or less expected as market assumptions following the 50bps rate cut by the Federal Reserve proved to be wrong down the road.
But then that darn double cut—we saw something that hasn’t happened since 1995. We saw loan rates go higher, not lower. It was a total buzzkill, and we’re beginning to feel it with earnings.
Cramer then talked about a latest earnings report from a notable homebuilder that showed soft results, indicating a weaker consumer. Cramer then summarized his thesis again on why he sees the overall market trajectory in what he called a “suboptimal situation.”
“If interest rates don’t stop rising quickly—they can go up slowly, but this quick rise means we’ll go right back to the same old story. Only a few big tech stocks were winning, while many more were losing. In other words, we’re on the verge of what I can describe as an extremely suboptimal situation if the bond market doesn’t settle down.”
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In
Our Methodology
For this article we watched several latest programs of Jim Cramer on CNBC and picked 10 stocks he’s talking about. With each company we have mentioned its hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up view of a payment terminal, capturing the sophistication of a payment network.
American Express Company (NYSE:AXP)
Number of Hedge Fund Investors: 68
Jim Cramer said in a latest program on CNBC that American Express reported strong quarterly results but Wall Street failed to recognize American Express Company (NYSE:AXP)’s strengths. He hit the “buy, buy, buy” button on the stock.
“For some reason, the market can never figure out how to properly judge the results from American Express Company (NYSE:AXP). I’ve lost track of the number of times that I’ve had to come out here and tell you Wall Street’s gotten another American Express Company (NYSE:AXP) quarter wrong.”
Jim Cramer then went on to analyze American Express Company (NYSE:AXP)’s results and pointed out why the stock fell after the results.
“I think Wall Street doesn’t know what to do with Amex’s gradual slowdown in revenue growth. It was just 8% this quarter. They’ve gone from basically the low double-digits to the high single digits over the past year. This isn’t so much an issue for the company’s current results, but it makes some investors question whether they can hit long-term targets.”
Jim Cramer then quoted American Express Company (NYSE:AXP) CEO’s comment from the latest earnings call:
“What our card holders will do is pull back slightly if they lose any confidence, see any sort of signs of their own stress but they will continue to pay their bills, and that’s why our credit numbers are so good. I think when you look at the organic piece of this, you see this especially within our small business. Our small business has been hit from a macro perspective. I think just like a lot of other companies, small business and at the organic spend or the same-store sales spend that is occurring on the card in small businesses is certainly not as robust as it was coming out of the pandemic. In fact, it is negative because when you look at our small business, our acquisition is good and our retention is really good. It is that organic spend that’s down.”
Read the full earnings call transcript here.
Cramer commented in this:
“That’s a fairly honest, sober assessment of the state of Amex’s business right now. Somehow the company has been able to post amazing earnings numbers, and the environment should get much easier as the Fed cuts rates.”
Cramer then explained exactly why is he bullish on the stock:
“Let me allow to explain the long-term opportunity here, which is American Express has the potential to grow with its legions of younger cardholders. Remember, they’re seeing terrific spending growth from millennials and Gen Z. Older customers are basically flat, but people seem to overlook the fact that this is a very positive indicator for the company’s future. See, once American Express lands these younger customers, there is a very good chance they’ll be able to hold on to them for life.”
Cramer told investors that “you have to trust me on this because I’ve been right the analysts have been wrong” as he explained he what called a “fantastic buying opportunity” around the stock.
Artisan Select Equity Fund stated the following regarding American Express Company (NYSE:AXP) in its first quarter 2024 investor letter:
“American Express Company (NYSE:AXP) shares rose 22% this quarter. This is an interesting case study given our earlier discussion about inflation. American Express operates one of the largest credit card networks in the world. Its revenue is largely a function of a fee rate applied to the dollar value of goods and services that are transacted through its network. That dollar value is, of course, nominal. As inflation pushes up the value of those goods and services as it has for the past few years, American Express will capture that value through its fee structure. The past few years inflation has clearly been a benefit. Aside from its inherent inflation protection, the business is a very strong one. Payments continue to shift toward electronic forms, benefiting American Express. It also has a strong brand that attracts loyal and highly profitable customers that are the envy of the industry. Recent results have been strong with revenues moving nicely ahead of GDP.”
Overall, AXP ranks 4th on our list of stocks Jim Cramer is talking about. While we acknowledge the potential of AXP, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AXP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
