American Express (NYSE: AXP) is one of those well-established companies that can be easy to overlook, if only because it’s been around for so long (the company turns 175 next month). While flashier financial stocks may be tempting to buy, there are plenty of reasons why this long-standing company has been a favorite of Warren Buffett’s Berkshire Hathaway portfolio.
The company accounts for roughly 15% of Berkshire’s holdings, making it the second-largest holding behind Apple. Here are a few reasons to follow Buffett’s lead and buy American Express while it’s trading below $320.
American Express reported 2024 results at the end of January, with total sales rising 9% to $65.9 billion and diluted earnings per share surging 25% to $14.01. Those strong results were fueled by increased spending by customers and strong customer acquisition (more on that later).
The strong top- and bottom-line results prompted management to issue impressive 2025 guidance, with revenue growth of 9% and an estimated earnings-per-share increase of 14% to $15.25, both at the midpoint.
It’s worth mentioning that American Express CFO Christophe Le Caillec said recently that first-quarter growth will be slower than in the previous quarter. Le Caillec said at a financial conference that fewer days in the quarter and a stronger dollar would cause lower revenue, but he also reiterated that the American Express’ full-year guidance is still intact.
One standout from the company’s full-year results was that it added a record number of new card acquisitions — some 13 million. Even more impressive is that 70% of those new cards are “fee-paying products,” meaning customers pay an annual fee to use them.
Adding to the good news for American Express is that younger, more affluent customers are ramping up spending. Gen Z and millennial spending rose 16% in the fourth quarter.
“Across the industry, the number of millennials and Gen Z consumers with premium products are growing at an even faster rate, and we’re adding highly creditworthy customers in these cohorts faster than the industry, with substantial room to continue this growth,” Le Caillec said on the latest earnings call.
Attracting younger customers is important to the company’s long-term strategy because it helps lock in customers for years. Management noted on the call that as Gen Z customers get older, they’ll be more likely to tap American Express for things like small business loans and other forms of credit.