Colin Plunkett: American Express finished out 2018 modestly below our expectations, growing revenues about 8% from the previous year. For the most part we think the market gets American Express right. Shares are only trading at about a 10% discount to our present fair value estimate of $110 per share.
With American Express we're really focused on the rewards environment. Total marketing spend was up about 15.5% from the previous year. Some people think that rewards activity will moderate over the next few years, but we really don't anticipate that and expect that American Express will have to keep spending generously to maintain cardholders. That said, we fully anticipate that American Express will be able to drive purchase volume growth. But it will be increasingly expensive to do so.
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Colin Plunkett does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.