American Express Is Warren Buffett's Second-Biggest Stock. Is It Still a Buy Near Highs?

American Express reported Q1 2026 revenue up 11% Y/Y to ~$18.9B and EPS up 18%, alongside billed business rising 10%, with Millennials/Gen Z driving spend growth. Credit quality remains stable with U.S. consumer net write-offs at ~1.9% and balances 30+ days past due near ~1.3%. The article flags the stock’s richer valuation (P/E ~22; forward P/E ~20 vs a historically low-to-mid-teens range) but notes management expects ~15% EPS growth this year and continues buybacks plus a ~1.1% dividend yield.

Analysis

AXP is increasingly a duration asset, not a deep-value recovery story. The real engine is fee density plus affluent wallet share: if younger cohorts keep migrating into paid products, the company can compound even without heroic margin expansion. That also creates second-order pressure on other premium issuers like JPMorgan’s Sapphire franchise and Capital One’s higher-end push, because AXP can defend pricing with brand + closed-loop economics rather than subsidizing growth indefinitely.

The near-term market setup is less attractive than the business. A ~20x forward multiple leaves limited room for a simply “good” print; the stock needs continued double-digit billed business and clean credit to justify further rerating. The first place the thesis breaks is not revenue but normalization: if refresh-driven spend slows, or if delinquencies/charge-offs move even modestly above pre-pandemic bands, the market will compress the multiple before earnings estimates fully roll over. July 24 is the first real catalyst; the next 1-3 months matter more for de-rating risk than for upside.

The contrarian miss is that investors may be overfocusing on valuation and underweighting cohort economics. A younger, fee-paying member base can extend the franchise’s growth runway for years, but that does not automatically translate into near-term stock outperformance. For now, this looks like a high-quality compounder that is probably priced close to fair value rather than a clean mispricing. If you already own it, the burden of proof is on the bear; if you don’t, patience likely improves entry.

Key Decisions for Investors

• Do not initiate new AXP size before the July 24 earnings print; wait for confirmation that billed business stays in double digits and credit metrics remain contained. Add only on a post-earnings pullback of 5%+ if guidance is intact.
• For relative value, favor a 3-6 month long Visa/Mastercard vs short AXP pair if AXP holds above ~20x forward earnings. Thesis: AXP’s valuation is already discounting durability, while network peers have less direct credit exposure and more room for multiple support.
• Set a hard alert on AXP if net write-offs trend above ~2.2% or 30+ day delinquencies start rising quarter-over-quarter; that would be the clearest signal that the premium-consumer resilience narrative is fading.
• If you need exposure to premium consumer spend, prefer merchants and travel beneficiaries over AXP itself until the next earnings reset confirms whether refresh-driven spend is sustainable.