American Express didn't start out in finance — it was a freight company back in the 1850s. But over the decades, it's transformed into a powerhouse in premium payments. Today, AmEx stands for more than just credit cards. It's built a closed-loop network, nurtured a loyal and affluent customer base, and carved out a niche where it makes money from both the cardholder and the merchant.

But in 2025, investors aren't rewarding stability the way they used to. With rising interest rates and growing concerns about credit quality, many are looking past what makes AmEx well-designed to handle economic swings. That, in my view, is a mistake. The stock is trading below its true worth because the market is too focused on short-term risks and not enough on long-term strengths — like its pricing power, spending resilience, and ability to control the full payments ecosystem. This is a business model made to weather economic ups and downs — and right now, that's being underappreciated.

Financial Performance: A Solid Beat in Q1 2025

In Q1 2025, American Express reported $17.0 billion in revenue, up 7% year-over-year (8% FX-adjusted), and net income of $2.6 billion, with EPS climbing 9% to $3.64. Card Member spending rose 6%, or 7% excluding the leap year effect — reflecting strong customer activity across all major segments.

Provisions for credit losses were stable, and AmEx maintained a flat net write-off rate of 2.1%, showing credit quality remains intact. Expense growth of 10% was driven by higher engagement in premium offerings, including travel benefits and rewards usage.

The company reaffirmed its full-year guidance of 8–10% revenue growth and $15.00–$15.50 EPS. That confidence really tells us a lot in a volatile macro environment.

Who Owns American Express Company?

American Express is backed by some of the most stable, long-term investors in the market — and that's not just a footnote. It's a key signal that the company's setup that lasts over timeis recognized by those who think in decades, not quarters.

Roughly 84% of the company's shares are held by institutions. The biggest name on that list? Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway, which owns over 151 million shares — a stake worth more than $45 billion and representing over 21% of the entire company.

Other heavyweights like Vanguard (6.5%), BlackRock (6.4%), and State Street (4.2%) also hold significant stakes — each representing billions of dollars in long-term capital. Meanwhile, insiders hold less than 1%, and retail investors account for around 15%.

This isn't a meme stock or a high-churn trade — it's a core piece in many portfolios for investors in it for the long run. That matters for valuation stability and long-term upside.

Valuation Metrics: What the Market's Missing

For a company with global reach and consistent profitability, American Express is trading at a valuation that doesn't reflect its quality. Its P/E ratio of 20.9 looks conservative next to Visa (36.4) and Mastercard (35.2), and its P/B of 6.7 is well below those same peers, despite strong capital efficiency.

AmEx also posted a Return on Equity (ROE) of 30.5%, more than triple Capital One's 10.4% and competitive with Visa's 44%. Mastercard's 141% ROE is inflated by a low equity base — not necessarily better performance.

Crucially, AmEx kept its net charge-off rate at 2.1%, versus Capital One's 3.5%. That gap reflects the credit quality of AmEx's premium customer base and its ability to underwrite with precision — an often-overlooked advantage that feeds straight into earnings durability.

So the here's where the opportunity lies: AmEx seems cheaper even though it stacks up well— or better — profitability, credit quality, and pricing power. That mismatch is the opportunity.

Competitive Landscape: Where the Real Threats Lie

American Express operates in a competitive environment. Each major peer poses a distinct challenge that could weigh on valuation sentiment.

Visa's scale and global reach put constant pressure on AmEx's merchant acceptance. With more merchant terminals and lower-cost processing, Visa can win share among small businesses and international retailers, making AmEx's global expansion harder — especially in cost-sensitive regions.

Mastercard is pushing aggressively into fintech partnerships, embedded finance, and real-time payments. While AmEx focuses on high-end consumer products, Mastercard is rapidly broadening its infrastructure relevance across B2B and cross-border flows. That kind of new platform moves might shift investor attention and could pull investor attention — and capital — away from AmEx.

Capital One is slowly creeping into AmEx's premium lane. With digitally-savvy offerings and lifestyle-based marketing, it's targeting the younger, affluent consumers that AmEx relies on for long-term growth. If Capital One starts gaining ground here, AmEx risks losing some of its brand cachet with future high-income generations.

Each competitor is strong in different ways, but none have AmEx's full-stack model. Still, if they continue gaining ground where AmEx is trying to grow — merchant footprint, innovation narrative, and next-gen loyalty — it could limit AmEx's multiple expansion, even if earnings hold firm.

Risks and Challenges: What Could Go Wrong?

AmEx is well-positioned for resilience, but the road ahead isn'trouble-free (or smooth). Customer loyalty comes with a price — literally. Travel perks, rewards redemptions, and card services are getting more expensive to maintain. In Q1, expenses jumped 10%, reflecting rising engagement but also raising questions about how profitably that engagement scales.

There's also regulatory heat to monitor. Global moves to cap interchange fees could eventually find their way to the U.S., threatening a core part of AmEx's revenue stream. And if merchants begin to steer customers toward lower-cost alternatives like Visa or Mastercard, it could weaken AmEx's pricing power.

Brand relevance is another soft risk. While AmEx owns the premium space today, younger consumers increasingly expect sleek, low-fee digital experiences. If AmEx can't evolve fast enough to stay culturally and digitally relevant, its growth engine could slow — even if the core business remains strong.

These aren't red flags, but they are friction points. They help explain why the stock remains undervalued — and why that valuation gap won't close unless AmEx manages them with precision.

Conclusion: Mispriced Strength

American Express isn't getting the credit it deserves. The business is growing, margins are holding, and loyal high-end users are staying put— yet the market still prices it at a steep discount to peers. Risks exist, but so does a rock-solid foundation. If you're looking for a durable, high-quality compounder that's being overlooked in favor of flashier names, AmEx might just be the undervalued giant under most people's radar.

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