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.
In addition, looking farther out we are concerned that the American Express brand doesn't resonate as strongly with millennials as it has with previous generations. Older generations viewed American Express as somewhat of a status symbol while millennials seem to care mostly about rewards and technology. In addition, Google search trends suggest that people aren't searching for American Express as frequently as they have over the past five years. This may suggest that American Express will struggle to build the next generation of American Express cardholders.