American Express (NYSE:) stunned investors with record revenue and a massive 39% increase in earnings in the second quarter. Despite these impressive numbers, the stock tumbled over 4% as it fell short of revenue estimates. But does this selloff present a golden buying opportunity for savvy investors?
Record Revenue Not Enough?
American Express saw a surge in interest income, driving its revenue to a record high of $16.3 billion in Q2. The company, unlike competitors Visa and Mastercard, also earns interest income as a lender. Non-interest income from swipe and annual fees climbed to $12.6 billion, with card member spending reaching $441 billion and loans growing to $131 billion.
Despite the revenue miss, net income soared by 39% to $3.0 billion, or $4.15 per share. The company’s robust performance was further bolstered by a 44% rise in earnings per share, even after adjusting for the sale of Accertify.
Outlook Calls for Growth
American Express raised its full-year earnings guidance to $13.30 to $13.80 per share, an 18% to 23% increase over 2023. Revenue is projected to grow by 9% to 11% for the year, with a 15% increase in marketing spending and a 23% boost in cash position.
Buying Opportunity
Despite the stock’s dip, American Express remains a solid investment choice due to its unique position in the credit card industry. With a P/E ratio of 20 and a focus on high-end clientele, the company offers stability and long-term growth potential. Warren Buffett’s Berkshire Hathaway also holds American Express stock for its reliability and strength.
Overall, American Express’s strong financial performance, positive outlook, and attractive valuation make it a compelling option for investors seeking a trustworthy and profitable long-term investment.