Freedom Broker: American Express retains nearly 15% upside potential

Freedom Broker analysts maintain a “Buy” recommendation on shares of American Express Company (AXP) and raise the target price from $370 to $385 per share. At the current price of $336.6, the upside potential is about 14.4%. In the experts’ view, the quarterly results confirmed the resilience of the company’s business model, while temporary pressure on earnings due to higher investment creates opportunities for long-term development.

What we know about American Express

American Express Company is one of the world’s largest issuers of credit cards and providers of payment services. The company serves individual and corporate customers in more than 200 countries, combining card issuance, acquiring, and payment processing within its own closed-loop business model. This approach enables American Express to generate revenue from both cardholders and merchant partners, maintaining high profitability and effective control of credit risks.

American Express remains a high-quality business with premium positioning, a strong customer base, and conservative risk management. Short-term pressure on earnings is driven not by a deterioration in operating momentum, but by the company’s intention to accelerate investment in technology, marketing, and international expansion, Freedom Broker analysts note.

Results came in in line with expectations

In Q2 2026, American Express increased revenue by 10% year over year to $19.64 bn, supported by higher customer card spending and growth in interest income. Card billed business rose 9% to $455.8 bn, and the number of transactions continued to increase.

Net income totaled $3.11 bn, 8% above the result a year earlier. Diluted earnings per share (EPS) rose 11% to $4.53.

Pre-tax income increased 15% to $4.07 bn, although a higher effective tax rate—23.6% versus 18.7% a year earlier—partly constrained net income growth.

A positive factor was credit quality. Provisions for credit losses amounted to $1.08 bn, noticeably below market expectations ($1.39 bn). At the same time, delinquency and charge-off metrics remain at comfortable levels.

Younger customers continue to support growth

One of the main drivers of the business remains activity from younger audiences. According to the company, the number of customers from the millennial and Gen Z cohorts increased 14% over the year, while their spending volume rose by about 40%. These categories now account for 38% of the customer base versus 36% a year earlier.

Additional support comes from resilient consumer spending in the US. Growth in card billed business was accompanied by an 11% increase in net interest income to $4.65 bn, while the loan portfolio reached $229 bn, up 8%.

Share-growth outlook maintained despite higher revenue guidance

Management raised its forecast for full-year revenue growth to around 10%, but kept its earnings-per-share guidance unchanged. The company intends to channel the additional financial result into business development, including updating its technology platform, improving the customer experience, and international expansion.

Over the long term, management expects to sustain annual revenue growth of more than 10% and EPS growth of around 15%.

Freedom Broker analysts believe that the decision to keep the EPS outlook unchanged was the main reason for the market’s negative reaction after the results were released. Nevertheless, the decline in the company’s valuation has made the shares more attractive: the forward P/E multiple has fallen to about 17.5, only slightly above historical averages.

What matters for investors

Experts believe that the key growth drivers for American Express remain its premium customer base, international business development, expansion of the product lineup, and a strong capital buffer. The CET1 capital ratio stands at 10.4% versus a requirement of 7%, allowing the company to both invest in growth and return capital to shareholders through share buybacks.

Analysts also see additional upside in expanding the deposit business. Currently, deposit accounts are opened by only about 10% of American Express cardholders in the US, leaving significant room for further monetization of the customer base.

How American Express is changing

American Express is steadily developing an ecosystem of financial and lifestyle services. In Q2, the company announced the acquisition of European restaurant booking platform TheFork for $700 mn in cash. The deal is expected to close by the end of 2026 after receiving the necessary regulatory approvals.

The transaction will allow American Express to expand its global network of partner restaurants to about 75,000 venues, strengthen premium offers and loyalty programs for cardholders, and integrate restaurant customer data with the company’s payment infrastructure.

In July, JPMorgan analysts upgraded their recommendation on American Express shares to “Overweight” from “Neutral,” while also raising the target price from $328 to $400 per share. The bank noted that the shares trade at a slight premium to the sector, but considers this valuation justified thanks to the company’s resilient revenue structure, strong customer base, and high business resilience amid economic uncertainty. 

In January, American Express presented its 2026 outlook, beating market expectations. The company said it expects EPS in the range of $17.30–17.90 versus the consensus forecast of $17.41, as well as revenue growth of 9–10%. At the time, the strong outlook was supported by resilient consumer spending and fourth-quarter results: EPS rose to $3.53 from $3.04 a year earlier, revenue increased 10% to $18.98 bn, and card billed business reached $445.1 bn (+9%). According to CEO Stephen Squeri, the company’s investments are driving growth in demand, engagement, and customer loyalty. 

Not an individual investment recommendation.