AmEx (AXP) will bet on SMEs and the younger generation for revenue growth

American Express Company AXP recently presented its vision of double-digit annual revenue growth over the long term at an Investor Day. The company focuses on small and medium-sized enterprises (SMEs) as well as young customers, as demand is expected to grow rapidly in these two sections.

Rising credit card spending will likely support its future performance. While AXP expects revenue to grow 18-20% in 2022, the growth rate is expected to stabilize at over 10% in 2024 and beyond as the economy reaches a steady state. Zacks consensus estimate for the company’s revenue is set at $50 billion for 2022. Moreover, the same for 2023 is $55.7 billion, indicating a growth of 11.4% year over year.

While AmEx expects earnings per share for 2022 between $9.25 and $9.65, suggesting a decline from $10.02 in 2021, the metric is likely to rise in the long term amid the adolescence. Zacks’ consensus estimate for the company’s net income for 2022 is set at $9.72 per share. The consensus mark further implies a year-over-year jump of 17.9% in 2023 to $11.46. AXP expects to benefit from the pandemic recovery as the travel sector rebounds.

The company has witnessed an increase in spending levels from the younger generation in recent months and expects the momentum to build in the coming days. As Millennials and Gen Z cardholders enter their high-earning years, demand for the company’s multiple financial products is expected to skyrocket. This can become a pillar of AmEx’s growth in the future.

Tailwinds from the pandemic recovery are helping the US small business slice. Thus, focusing on the SMB customer base while improving the company’s technology and customer services will likely lead to portfolio growth. Growing merchant traction and digitization of payments will likely help AmEx grow over the long term amid heightened competition in the payments market. The company intends to expand its network in the United States by advancing into new industries in the plastics space, such as buy-it-now-pay-later (“BPL”) solutions.

Earlier this month, it extended its BNPL ‘Plan It’ program to one of its partner outlets for the first time. While AmEx is committed to exploiting growth opportunities in the BNPL market, the competition continues to grow. Other companies like visa inc. V, Global Payments Inc. GPN and Mastercard Incorporated MA is also strengthening its presence in the BNPL space, which has grown rapidly during the pandemic.

Visa’s payout solution was first launched as a pilot just before the pandemic and gradually expanded to the United States, Canada, Malaysia and Russia. V’s solution was launched in Australia in 2021. A significant number of issuers, acquirers and fintechs use Visa’s payout solution to help clients access BNPL options.

Mastercard expects to capture a significant share of the BNPL market with Mastercard’s installment program. MA expects BNPL’s estimated value of e-commerce transactions to be $7.2 trillion by 2025. The service is expected to initially launch in the US, Australia and the UK. Mastercard has included more participants in the BNPL program to better serve customers.

Global Payments offers enhanced payout solutions, which should help merchants improve payment conversions and increase sales. Its installment payment solutions should help any retailer reduce cart abandonment rate. GPN has opted for partnerships to strengthen its BNPL presence.

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