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

American Express highlighted resilient demand and credit quality in Q1: revenue rose 11% YoY to ~$18.9B, EPS climbed 18%, and billed business grew 10%. Credit remained stable with net write-offs at ~1.9% and delinquencies (30+ days) near 1.3%, while management projects full-year EPS of $17.30–$17.90 and expects ~15% EPS growth this year. Shares trade at ~22x trailing P/E and ~20x forward P/E (above the prior decade’s low-to-mid teens), implying less “rerating” upside, but the stock still screens as a reasonable buy for longer-term compounding backed by continued buybacks and a ~1.1% dividend yield.

Analysis

The key market implication is that AXP is transitioning from a rerating story to a pure compounding story. At ~20x forward earnings, the stock is now pricing in sustained mid-teens EPS growth plus benign credit, so the next leg higher likely requires either a richer fee mix from younger cohorts or another step-up in card economics; otherwise returns compress toward earnings growth plus buybacks, not multiple expansion.

The competitive read-through is more interesting than the headline. If younger, fee-paying cardholders are still scaling, premium-card competitors that rely on reward-heavy acquisition economics may face higher customer-acquisition costs or be forced to subsidize perks longer, which favors AXP’s closed-loop model and disadvantages more promo-dependent issuers like COF and, to a lesser extent, JPM’s premium-card ecosystem. The second-order loser is any issuer whose unit economics depend on transacting but not monetizing the relationship at the same level as AXP.

Near term, the biggest risk is not spending deceleration; it is that credit remains too clean and the market treats that as normal, then gets surprised when delinquencies mean-revert on a lag. The 1-3 month catalyst window is the July 24 print: if billed business slows even modestly or fee-paying mix stalls, the multiple can de-rate quickly because the stock is no longer cheap. Over 6-18 months, the contrarian bullish case is still valid: younger cohorts can extend lifetime value and sustain above-market growth, but that is already partly reflected in valuation.

Consensus is probably underweight the downside asymmetry from expectations, not the business quality. This is a great business, but at this price the burden of proof has shifted to the next several quarters; absent an earnings upside surprise, AXP is more likely to grind than rerate. Falsifier for the constructive view would be a post-earnings slowdown in billed business below high single digits, a step-up in net write-offs above ~2%, or management trimming full-year EPS growth/repurchase cadence.

Key Decisions for Investors

• Do not chase AXP into 7/24 earnings; wait for the print and only add on a 5-8% pullback if billed business stays at least high-single digits and write-offs remain contained.
• Relative-value idea: long AXP / short COF into the next 1-2 quarters to express premium-franchise durability versus more credit-sensitive consumer finance; target 8-12% relative outperformance if consumer stress reappears.
• If already long BRK.B, treat AXP as a quality barometer rather than a fresh catalyst; add only if AXP lags by 3-4% on a clean print, which would likely give a better entry than chasing the current multiple.
• Set an alert on AXP credit metrics and guidance on 7/24: if net write-offs move above ~2% or 2026 EPS guidance is not reaffirmed, cut exposure quickly because the stock’s valuation buffer is thin.
• For options-conscious accounts, prefer a short-dated post-earnings call spread over an outright long; the asymmetry now favors modest upside with capped multiple expansion.