Premium credit card provider American Express (AXP) is a classic example of how having a few of the right customers is far more powerful than having millions of the wrong ones. The resilience that comes from a premium client base translates into consistent revenue growth, a return on equity comparable to elite banks, and higher net margins than volume-dependent credit card networks—all of which support stable and predictable profits, even in adverse macroeconomic cycles.
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When Amex reported its Q3 earnings last week, the numbers once again reflected this dynamic of resilience and above-trend growth. The quarter was marked by strong expansion in billed business and continued strength in net interest income, which remained solid despite a modest year-over-year slowdown.
Additionally, Amex reinforced market confidence in its growth trajectory by raising its 2025 targets—signaling a roughly 1-point increase in the midpoint of revenue growth guidance and a modest upgrade to earnings per share expectations, reflecting the company’s underlying operational strength.
On the flip side, with the stock trading near all-time highs, concerns about overvaluation are becoming harder to ignore. Even so, technical momentum remains firmly bullish, signaling the kind of long-term strength that supports a constructive outlook for the stock—despite the potential for short-term pullbacks at these elevated levels.
For investors with a medium-term investment horizon of up to six months, however, even after the strong earnings print, buying AXP on dips may be the most prudent approach. For that reason alone, I currently rate the stock as a Hold.
What Matters Most for Amex
American Express has enjoyed strong price momentum since reporting its third-quarter earnings. In addition to beating expectations across the board—marking its third consecutive quarter of outperformance—the company delivered EPS of $4.14, about 4% above consensus, and revenue of $18.43 billion, roughly 2% above forecasts.
But arguably, the most encouraging post-earnings reaction came down to two key lines in the income statement that lifted expectations for a stronger 2H25: discount revenue and net interest income.
Discount revenue, essentially billed business (total spending volume) multiplied by the average discount rate or take rate (the fee Amex charges per transaction)—remains the company’s single largest revenue source, accounting for 51% of total revenue in the most recent quarter.
In Q3, Amex reported $9.14 billion in discount revenue, up 7% year-over-year. This growth was fueled by a solid rebound in total billed business, which returned to 8% YoY growth, matching the levels seen in Q4 2024—the company’s seasonal high—and coming in about two points above the same period last year, with spending in Goods & Services up 9% and Travel & Entertainment up 8% suggesting that Amex’s growth is broad-based.
On the Net Interest Income (NII) side, the second-most-important line in the revenue mix, Amex reported $4.5 billion, an increase of 12% YoY, broadly in line with its six-year CAGR of 13%. This result was driven by 7% YoY growth in card loans—slower than the 10% seen in Q3 2024, but still very solid within the credit card industry, especially given the softer macro environment.
A Moat That Pays for Itself
Since equity markets trade more on expectations than on what has already been delivered, solid discount revenue and net interest income figures—despite some signs of softer consumer spending compared to last year’s travel and retail data—bode well for the second half of 2025.
And this brings us to American Express’s moat: its super-premium clientele. Roughly half of all U.S. consumer spending comes from the top 10% of households, and that segment is precisely where Amex’s customer base is concentrated. Strong discount revenue, therefore, suggests that billed business should continue benefiting from the spending resilience of high-income consumers, particularly in Travel & Entertainment.
Net interest income, meanwhile, should remain elevated—not only because card loan growth is still robust, but also due to a more favorable rate environment. The caveat here is that Q3 showed a slower pace of loan growth relative to billed business expansion, which could indicate that fewer cardholders are carrying balances or that Amex is intentionally moderating credit-card growth for risk-management reasons.
Looking ahead, I’d keep an eye on whether loan growth slows further while spending remains strong, as that might signal tighter underwriting or a gradual shift toward more pay-in-full customers. That’s not necessarily negative, but it could temper the pace of interest income growth going forward.
Valuation Strength Backed by Momentum
In line with its strong results, Amex has been building solid momentum in its stock. Short, medium, and long-term moving averages all point upward—a classic sign of a well-established bullish trend, especially after the golden cross that formed in midyear. In simple terms, it shows that bulls are buying the dips rather than running from them.
From a technical analysis perspective, AXP does look a bit stretched in the short term, but the base remains undeniably solid. Minor pullbacks toward the $320 range would likely be healthy and could represent a new buy-the-dip zone.
From a fundamental perspective, Amex’s guidance implies double-digit bottom-line growth and high single-digit top-line growth, driven by strong billed business, resilient net interest income, and a return on equity above 30%—well above the financial sector average.
That gives the stock good reason to trade at a premium multiple. At present, with shares hovering near all-time highs, AXP trades at roughly 23.8x earnings—a high premium relative to the sector, though well below those of the two credit card titans, Visa (V) and Mastercard (MA).
Still, although it may sound counterintuitive, when momentum aligns with solid fundamentals, strength tends to feed on itself. In other words, the trend favors those who invest in quality, and Amex stands as a company that commands a rich valuation precisely because it consistently delivers.
Is AXP a Buy, Hold, or Sell?
Despite the bullish momentum, Wall Street sentiment on AXP remains relatively moderate. Of the 20 analysts covering the stock, eleven rate it a Hold, seven a Buy, and two a Sell. The average price target is currently $350.22, implying ~2.6% downside over the coming year.
Holding Strength at the High End
American Express defied expectations that Q3 would be a bumpier quarter amid uneven consumer spending and softer growth prospects in the Travel & Entertainment billed business. Instead, the company’s moat spoke louder—it successfully capitalized on its high-income customer base, a trend that should continue to play out through 2025 as the company’s guidance implies.
Although AXP is now trading near its all-time highs, short-term trading behavior may become more cautious; the momentum built since midyear supports a continued bullish tone. Bulls appear to be consistently buying the dips, and I believe that in any eventual pullback, that remains the best approach.
For long-term investors, holding AXP for multiple years still makes a lot of sense given its strong fundamentals and consistent execution. In the short term, however, I’d be more cautious about adding at current levels and would prefer to buy on weakness—around $320, which looks like a solid floor. Under these circumstances, AXP remains a Hold for now.