American Express Co. - Stocks

Instrument description

The financial corporations are regarded as the backbone of the business environment and perform many essential tasks, some of the important financial institutions include central banks, retail and commercial banks, insurance companies, investment banks, brokerage firms and mortgage companies. The popular banking services that millions of consumers around the world use our credit cards and debit cards.

American Express also famously known as AMEX is an American multinational company that offers a wide range of financial services. AMEX is located in New York City and one of the companies that are listed and actively trades on the Dow Jones Industrial Average. AMEX is popular worldwide due to its charge cards, credit cards, and traveler checks. The company offers its services globally and also manages strategic partnerships and alliances with third-party card issuers.

AMEX is the largest card-issuing financial firm in the world according to purchase volume, and it is also the 4th largest card network according to a number of cards in circulation. AMEX was included in the 20 Most Admired Company in 2017 by Fortune. In recent years, AMEX has expanded its services by offering fee services, merchant acquisition, and traveler checks.

AMEX has headquarter in New York but does business in over 40 countries and has more than 60,000 employees. AMEX has offices across USA, Mexico, in Europe from London to Rome, and in Sao Paulo, Shanghai, Hong Kong, Tokyo and Sydney.

History of AMEX

Henry Wells first formed Wells & Co. in 1841 and business was to the safe delivery of valuables. American Express was formed on March 28, 1850, by William Fargo, Henry Wells, and John Warren Butterfield. The head office is situated in New York City and the company initially offered express mail service, and soon it was delivering money order by 1903 and had assets worth $28 million. The traveler checks became the prime business of American Express and established the firm in the global market, and in 1959 it is also started issuing embossed plastic cards for the first time.

American Express merged with Merchants Union to form American Merchants Union Express Co. in 1968 and in the same year Henry Wells retired. In 1881, founding member William Fargo died and in 1891, the American Express Traveler’s Check is launched. In 1914, George C. Taylor became president, and in 1915, the company opens its own Travel Department.

In 1958, American Express introduced the ‘Green Card’ which was a travel and entertainment card. The company acquired Shearson Loeb Rhodes Inc. in 1981 and in the following year the company is restructured to form American Express Corp. The Optima card was launched in 1987, and in 1993, Harvey Golub becomes CEO and wins the Federal government’s travel contract. In 1999, American Express launched Blue, which was the first smart card offered in the U.S.

American Express made many acquisitions in the 1980s to grow its investment banking service. But the company left the business a decade later. In 2008, during the recession period, American Express was fortunate to get permission to convert into a bank holding company and that enabled the firm to get assistance under the Troubled Asset Relief Program.

From 1850 to 2020, American Express is 170 years old and one of the oldest financial institution in the world that has grown tremendously over the decades and met the growing demands of businesses and everyday consumers in an efficient way. AMEX is the name of the trust, quality, integrity, and superior customer service.

Current Business and Investment of AMEX

American Express focuses on delivering charge and credit cards, along with travel-related financial services. The company is popularly known for its Platinum, Gold, and Green credit cards. The credit cards are offered to both retail and commercial customers. The charge card offers credit monthly which the user must pay each month. AMEX functions in five segments

1. Global Consumer Services Group is responsible for issuing a wide range of consumer cards globally
2. Global Commercial Services provide a range of options such as corporate and small business cards, commercial financing products, and payment and expense management options.
3. Global Merchant and Network Services serves a great purpose of managing global payments through processes that settles card transactions, offer multi-channel marketing programs, acquires merchants, and data analytics.
4. Corporate Services usually looks into corporate functions and managing certain operations and businesses.

The American Express cards are also called AMEX cards and offer many advantages such as reward points, cashback, and travel points. The AMEX cards are also sponsored by prominent companies such as Delta Airlines and Hilton Hotels. American Express is probably the only financial company that issues cards and also processes the card payment. On the other hand, rival brands such as Visa and MasterCard only provide network services and do not issue cards.

In 2016, American Express accounted for nearly 23% of total credit card transactions in the U.S. In 2017, Forbes named American Express as the 23rd most valuable consumer brand and first among financial services provider. By the end of 2019, the company has 114.4 million cards globally, and from it, 54.7 million are active in the U.S. In 2020, American Express was ranked at 9th position among List of 100 Companies based on employee satisfaction.

Risk and Potential in AMEX Business Environment

American Express is a global brand that offers premium and valuable services of charge and credit cards, along with Travel cards, Gift cards and Rewards. The company emphasizes in providing financial services to large business enterprises and rich businessmen. The SWOT analysis allows American Express to form a future strategy for the company by looking at its internal and external factors for growth. The SWOT analysis of AMEX is

• Strengths

The biggest strength of the company is its brand name and business spanning for more than 150 years. While traveling American Express is the name trusted by millions. The company eases transaction for everyone with its products such as charge cards, credit cards, and traveler’s checks. Much of the success comes from Global Merchant Services. The loyalty programs have increased the revenue of the company

• Weaknesses

The company’s main focus for decades has been traveler’s checks which is seeing a decline with the passage of time. The company lacks in providing debit card services at the point of sale. American Express also relies more on third-party for many key services.

• Opportunities

American Express can increase its growth by expanding into emerging markets. Strategic mergers and acquisitions can improve the performance of AMEX. The company can diversify its portfolio by offering new and innovative products and services such as online payments, use of block chain technology, and mobile-based services.

• Threats

The biggest challenge for American Express is a recession and economic slumps along with strict government regulations. The company also faces tough competition with rival brands such as Visa and MasterCard. The currency fluctuation and interchange fee also influences the growth of AMEX.

Stock Analysis of AMEX

American Express is listed and actively trades on the New York Stock Exchange with the ticker symbol AXP. The company is listed under the ‘Finance’ Sector, and the industry is ‘Financial Conglomerates’. American Express is also part of Dow Jones Industrial Average, S&P-100 Index, and S&P-500 Index.

The company reported $43.556 million in revenue for 2019 with a growth rate of 7.97%.

Over the years, AMEX has seen many financial ups and downs. For example, the company reported net income of $5.4 billion in 2016, but there was a considerable drop in 2017, and net income was reported as $2.7 billion. The diluted earnings per share value were $5.65 in 2016 but fell to $2.97 in 2017. However, if the U.S Tax Act was not implemented, then the earnings per share value in 2017 would have been $5.87, which was as predicted by the company in October 2017.

Early in 2000, the share price of AMEX saw quite volatile and sudden movement as the share price was $25 in October 2001 but climbed to $65 in June 2007 but then again falling to $10 in March 2009. The company recovered from its losses and touched a high value of $95 in June 2014. Another drop in share price occurred in early 2016, but the share price recovered and touched the all-time high value of $101 in February 2018. The all-time high value of American Express share was $136.93 on February 19, 2020, and the average share price for the year is $110.35.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.