Credit card metrics continue to strengthen. Should I buy American Express shares in September 2021?

By:
on Aug 29, 2021
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  • American Express's business has proven stability throughout the first half of the 2021 year
  • Credit card metrics continue to strengthen
  • If the price jumps above $170, the next target could be around $175

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American Express Company (NYSE: AXP) shares have advanced more than 4% in the last five trading days and closed the week at $168.65. The U.S. stock market remains supported after Federal Reserve Chair Jerome Powell signaled the U.S. central bank would continue to keep its ultra-loose monetary policy.

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Fundamental analysis: Credit card metrics strengthen in July

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American Express is an American multinational financial services corporation that operates in credit card and traveler’s cheque businesses. American Express shares continue to trade above $160 support, and its business has proven stability throughout the first half of the 2021 year.

American Express continues to benefit from improving consumer and business spending trends, the pace of the global recovery is exceeding earlier expectations, and because of this, the outlook for this company is significantly more favorable currently than even a few months ago. Credit card metrics strengthen in July and Betsy Graseck, an analyst from Morgan Stanley, said that credit card metrics continue to perform better than expected while setting new all-time bests.

American Express’s delinquency rate, which is defined as the percentage of total loans that are 30 days past due, remains at 0.6% from June and falls from 1.40% in July 2020. The travel and entertainment sections continue to improve due to summer reopening; still, the Delta variant of the coronavirus, together with further new variants, continues to pose risks.

“Credit card net charge-offs and delinquency rates improved M/M as “typical seasonal trends are muted given the macro/fiscal backdrop. We note that the vast majority of loans have exited deferral/forbearance, yet credit remains benign overall, likely due to strong household balance sheets and ongoing child tax credits,” said John Hecht, an analyst from Jefferies.

American Express’s second-quarter results were in line with the recovery in economic activity; total revenue has increased 33.3% Y/Y to $10.24 billion, while the GAAP EPS was $2.80  (beats by $1.17). TTM earnings per share are above $8, the company’s management remains very optimistic about the upcoming quarters in terms of growth, and with a market capitalization of $133.9 billion, shares of this company are fairly valued.

Technical analysis: American Express shares have advanced more than 4% in the last five days

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Data source: tradingview.com

American Express shares have advanced more than 4% in the last five trading days, and according to technical analysis, the bulls remain in control of the price action for now. Rising above $170 supports the continuation of the bullish trend, and the next price target could be around $175.

On the other side, if the price falls below $160, it would be a “sell” signal, and we have the open way to $150.

Summary

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American Express’s business has proven stability throughout the first half of the 2021 year, mainly driven by the company’s strong credit performance and continued improvements in the macroeconomic outlook. According to technical analysis, the bulls remain in control of the price action, and if the price jumps above $170, the next target could be around $175.

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