Here's Why Shares of American Express Are Plummeting
American Express shares plummeted 6% after the company reported a 12% increase in expenses, with marketing expenses up 9% and expected to continue growing through the end of 2026.
Intelligence analysis by Llama
American Express reported strong revenue and earnings growth, but rising expenses, particularly marketing expenses, worried investors, causing the company's shares to fall.
American Express is a company that helps people pay for things using special cards. They reported good news about how much money they made, but also some bad news about how much they spent. This made investors worry and caused the company's stock to go down.
Analysis
A $60B Vote of Confidence
American Express reported strong revenue and earnings growth in its second-quarter results, with revenue net of interest expense rising 10% to $19.6 billion. This growth was driven by higher card member marketing expenses, which increased by 9% during the quarter. However, the company's expenses grew 12% year over year to $14.5 billion, with marketing expenses expected to continue growing through the end of 2026. This has worried investors, causing the company's shares to fall by over 6% in last Friday's morning trading.
Why Cursor?
The company's success with younger consumers, including millennials and Gen Z, who are its fastest-growing group, is a real positive. However, the higher marketing expenses could indicate that those new memberships are increasingly expensive for the company to obtain. This raises concerns about the company's ability to maintain profitability as it invests in marketing to attract and retain new customers.
The Road Ahead
American Express has been increasing its marketing spending on several card products to attract and retain members. The company has had success with younger consumers, but the higher marketing expenses could indicate that those new memberships are increasingly expensive for the company to obtain. This raises concerns about the company's ability to maintain profitability as it invests in marketing to attract and retain new customers.
Key points
- American Express reported strong revenue and earnings growth in its second-quarter results.
- The company's expenses grew 12% year over year to $14.5 billion, with marketing expenses expected to continue growing through the end of 2026.
- The company's success with younger consumers, including millennials and Gen Z, who are its fastest-growing group, is a real positive.
- The higher marketing expenses could indicate that those new memberships are increasingly expensive for the company to obtain.
If American Express can find ways to reduce its marketing expenses and maintain profitability, its stock could potentially recover and even increase in value.
If American Express continues to struggle with high marketing expenses and fails to find ways to reduce them, its stock could potentially continue to fall and even reach new lows.
