Should you invest in American Express shares after solid Q2 results?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jul 23, 2021
  • American Express shares gained 3.44% on Friday after posting better than expected Q2 results.
  • The financial services company posted revenue and earnings that beat analyst estimates.
  • Should you invest in AXP stock in Q3 2021?

American Express Co. (NYSE:AXP) shares surged 3.44% higher on Friday after the company delivered impressive Q2 results. AXP reported stronger than expected revenue and earnings before markets opened.

The company’s EPS spiked 866% to $2.80, beating analyst expectations by $1.17. On the other hand, revenue grew by 33.3% to $10.24 billion beating the consensus Street estimate by $650 million.

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Analysts said American Express’s impressive Q2 performance demonstrates the rise in consumer spending in the US amid the easing covid situation. As a result, AXP management said it now expects to reach the high-end of its previous guidance for this year.

Chairman and CEO Stephen Squeri said:

We saw Card Member spending accelerate from the prior quarter and exceed pre-pandemic levels in June, with the largest portion of this spending growth coming from Millennial, Gen Z, and small business customers.

American Express issued full-year guidance of $6.00-$7.50 earnings per share earlier in the year.

Why buy American Express shares in Q3 2021?

From a valuation perspective, American Express shares trade at an attractive forward P/E ratio of 18.55, making the stock a compelling option for value investors. 

Analysts also expect AXP EPS to grow by 20.70% next year and at an average of 42.30% over the next five years. Therefore, American Express will also attract growth investors.

The company will continue to benefit from the current rise in consumer spending in Q3, but investors should also be cautious of the potential drawbacks caused by the delta variant of covid-19.

Nonetheless, it would be best if you considered adding AXP stock to your portfolio at the current valuation and the promising growth story.

Source – TradingView

Technical overview: American Express stock price predictions for August 2021

Although AXP shares are up nearly 50% this year, the bull run looks far from over. The stock price is yet to hit overbought conditions in the 14-day RSI despite Friday’s gains. As such, it seems American Express still has more room to cover as it continues to advance after its impressive Q2 results.

Therefore, investors can target extended rebounds at approximately $184.02 or higher at $190.36. The key support levels are $170.19 and $163.51.

Bottom line: the case for buying American Express stock now

In summary, American Express appears to benefit from the rising consumer spending amid the easing covid situation. However, the delta variant is still a potential bottleneck in the growth story.

Nonetheless, AXP stock’s Friday gains did not push the price to overbought conditions, leaving more room to run. So now could be a great time to add AXP shares to your portfolio.

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