4. 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.”
