American Express stock took a hit after the company reported its third-quarter earnings in mid-October. The credit card giant posted an 8% year-over-year increase in net revenue, while net income grew by 2% to $2.51 billion, surpassing analyst expectations. However, the company missed the average revenue projection of nearly $16.7 billion.
Investors also expressed concern over the company’s 21% increase in reserves for credit losses, which reached $5.3 billion. This suggests that American Express may be anticipating a rise in delinquencies in the coming periods. Despite these concerns, Jim Cramer, host of “Mad Money,” remains bullish on American Express.
mixed investor reactions to earnings
He believes that the post-earnings price dip is an anomaly and that the company has a strong future ahead. Cramer points out that American Express has been successful in attracting younger customers, particularly Millennials and Gen Z members.
CFO Christophe Le Caillec stated on the earnings call, “We continued to see very strong loyalty with this younger cohort with new customer retention higher than that of older generations.”
The company’s spokesperson also noted that “Millennial and Gen-Z consumers are a key growth engine for us, as our fastest growing consumer cohort overall in the U.S. and accounting for 60% of the new consumer account acquisitions globally.”
Cramer believes that these younger customers will likely stick with American Express for decades to come, providing a significant long-term growth opportunity for the company. Furthermore, Cramer expects American Express to benefit from the Federal Reserve’s ongoing interest rate cuts, which could lead to increased borrowing and credit card spending. Despite the mixed earnings report, American Express has demonstrated solid performance, with a 6% year-over-year growth in Card Member spending and a 15% net income margin.
Cramer remains confident in the company’s ability to sustain its growth and believes that the recent stock price dip presents an attractive buying opportunity for investors.
