American Express Rallying into Earnings, Stock Remains in Bear Market (NYSE: AXP)

American Express (NYSE: AXP) moves into the next set of earnings with its stock price rallying, having added 13.6% over the past week of trading. As markets gear up for the first-quarter 2025 earnings report before tomorrow's (17th of April) opening bell, we take a look at what to expect.

Analysts anticipate GAAP Earnings Per Share (EPS) of $3.48 on revenue of $16.94 billion. While this represents a solid estimated year-over-year EPS growth of 4.42%, investors will be keenly focused on management's commentary regarding consumer spending trends and credit quality.

Fears of a potential slowdown in consumer spending, particularly among the premium segments Amex caters to, loom large and could impact future guidance.

During this morning's pre-market, American Express' stock is trading down 1.1% at $255, with signs that the recent rally could be running out of steam. The stock has seen dramatic swings over the past year as you can see in the chart below, including a sharp 5.90% drop on April 10th preceded by an impressive 13.38% gain on April 9th.

The current price sits more than 20% below its 52-week high of $326.27, achieved earlier this year, yet remains firmly above its 52-week low of $216.12. This puts American Express' stock within it's own bear market. With an 18% gain over 12 months giving way to a 13.59% decline YTD, broader market sentiment, and potential concerns surrounding the economy are clearly weighing on the stock.

Technically, the picture for AXP appears challenging. The stock is currently trading below several key moving averages, often interpreted by traders as bearish signals. Specifically, it sits below its 50-day Simple Moving Average, 200-day SMA of $273.47, and its 20-day Exponential Moving Average (EMA). This configuration suggests that recent downward momentum has overcome shorter and longer-term positive trends, putting the stock in a technically vulnerable position as it consolidates below established resistance levels.

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Adding another layer of complexity are two controversial shareholder proposals set to be addressed at the company's Annual Shareholder Meeting on April 29th.

• NLPC’s DEI Proposal: Submitted by the National Legal and Policy Center (NLPC), it targets the elimination of executive incentives linked to diverse supplier goals – a practice Amex states is no longer part of its compensation structure.
• Bowyer Research’s Advertising Audit: This proposal calls for an audit of advertising spending risks associated with politically or religiously sensitive content.

Analysts Targets and Outlook

Despite the recent turbulence, some analysts see underlying value. Bank of America, for instance, upgraded AXP to “Buy” on April 5th, even while trimming its price target from $325 to $274. BofA cited the company's historical resilience during economic downturns, largely attributed to its affluent customer base which typically exhibits lower credit losses compared to broader market averages. The bank framed the stock's significant pullback from its January peak (around 22% decline at the time) as a potential buying opportunity, although it did moderate its revenue growth forecast for 2025 to 8-10%.

Beyond the immediate headwinds, American Express continues to execute strategic initiatives aimed at long-term growth. The recently announced plan to acquire expense management software firm Center, expected to close in Q2 2025, aims to bolster its commercial offerings by integrating card services with automated accounting tools. Furthermore, partnerships like the one launched with Alipay in February seek to capture spending from international travelers in China, particularly targeting Millennial and Gen Z consumers.

Collaborations, such as the one with Formula 1, also underscore a marketing push to attract younger demographics to the Amex brand. While strategically sound, the near-term costs associated with these initiatives could weigh on margins.

Fundamentally, American Express concluded 2024 on a strong note, reporting a 9% increase in revenue to $65.9 billion and a robust 25% jump in EPS to $14.01. The company's guidance for 2025 anticipates continued growth, projecting revenue increases of 8-10% and EPS between $15.00 and $15.50. Reinforcing confidence in its financial stability and cash flow generation, Amex recently announced a significant 17% dividend increase to $0.82 per share.

The upcoming Q1 earnings release and the subsequent shareholder meeting will be critical catalysts, likely setting the tone for AXP shares in the coming months. Balancing the potential for a rebound driven by its resilient model against the risks highlighted by recent price action will be key.