A decade ago it was common to ask if younger Americans were falling out of love with plastic. The reasons offered were many: They had seen their parents deal with card debt; they didn’t care about frequent-flier miles; and they had new alternatives like buy-now-pay-later loans. One company saddled with that baggage was American Express.
Amex’s then-chief executive acknowledged that its 2015 financial performance was “disappointing." The stock’s forward price-to-earnings ratio fell to under 10 times in early 2016, an unusually low level for the company. Fast forward to 2024. Amex shares are now zooming, up over 25% this year.
The stock has returned an annualized 17% since the start of 2020, beating the S&P 500’s annualized return by almost 4 percentage points. It is now trading at over 17 times forward earnings. And at its investor day presentation in April, Amex’s current chief executive Stephen Squeri reiterated the company’s belief that it can deliver 10%-plus annual revenue growth over the long term.
Younger card members have been one driving force. Over three-quarters of new accounts acquired in 2023 for U.S. consumer premium Gold and Platinum cards were Gen Z or millennial-aged, according to company figures.
It appears that many of Amex’s young consumers are going straight to cards such as the $695-annual-fee U.S. consumer Platinum, rather than starting with no-fee cards and working their way up. It may be the case that a cohort of millennials, some of whom started their financial lives around the time of the 2008-09 financial crisis, did feel some reluctance about credit cards.
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