Guru	Date	Action	Impact	Price Range (Average)*	Change from Average	Comment	Current Shares

Daniel Loeb Comments on American Express - Nov 09, 2018

American Express (NYSE:AXP) (“Amex”) is a ubiquitous franchise, with 115 million cards‐in‐force and $1.2 trillion of billed business, making it the fourth largest payment network globally. It is also a franchise that appeared to lose its way in recent years. From 2014‐2017, Amex lost co‐brand relationships with JetBlue and CostCo and saw increased competition from Chase’s Sapphire Card; EPS growth halved; and shares underperformed the S&P 500 by ~40%. We think this challenging period galvanized the franchise, forcing necessary investments and a strategic pivot that is just beginning to pay off. New CEO Stephen Squeri is re‐energizing Amex by focusing on topline growth and under‐appreciated structural opportunities in Commercial and International – efforts we think will lead to more sustainable double‐digit EPS growth going forward.

Amex has a significant opportunity to sustain higher revenue growth as it prioritizes investments that drive customer acquisition, card acceptance, and higher average spend. This is a long runway where Amex is just beginning to inflect after years of under‐investing. Proprietary card acquisitions hit 3 million last quarter and total cards rose 7% Y/Y – the strongest user growth in a decade. Merchant acceptance is growing at a high single‐digit pace, twice that of Visa/MasterCard, and Amex aims to reach virtual parity with the latter networks by the end of 2019. Average spend is also scaling with the merchant network, as Amex reaches across demographics, with Millennials making up half of new Platinum customers, and deeper into member wallets, with 60% of loan growth coming from existing account holders. Overall, management has re‐prioritized share, scale, and relevance – a formula that is driving billed business and net revenue growth of >8% the past 5 quarters, nearly twice the average pace of the past two decades.

As part of its strategic refresh, Amex also re‐aligned operating segments earlier this year to better execute on the structural growth in Commercial and International payments. Today, Global Commercial Services (“GCS”) is Amex’s fastest‐growing segment, with billed business up 12% Y/Y, and a close #2 in scale and profitability to Global Consumer. In large corporate, Amex has relationships with >60% of the Global Fortune 500; in SME, Amex is larger than the next five players in the US combined (by spend). While Wall Street tries to find the next high‐multiple stock to monetize the shift in B2B payments – an area with ~ $ 20 trillion of addressable spend and ~10% penetration – they are missing a more obvious beneficiary in American Express, where B2B already makes up 2/3 of commercial spend. No one is better equipped to monetize the opportunity than Mr. Squeri, who previously ran Amex’s Commercial division. The recent partnership with Amazon to offer co‐brand cards to small businesses is testament to Amex’s positioning in the commercial market.

Amex also has a structural growth opportunity as it presses its unparalleled value proposition in less competitive international markets. International SME and Consumer, which together are nearly 1/5 of total billings, are now growing proprietary billings at ~18% Y/Y (FX‐neutral). In International SME, Amex is just scratching the surface, with <5% market share in each of its eight core markets – seven of which are now growing double‐ digits. In International Consumer, Amex has an opportunity to boost wallet‐share with high‐ income spenders and has now grown billings by over 10% for eight consecutive quarters – double the pace of the previous five years. Finally, the growth is less about cyclical tailwinds than greater operating focus: both Commercial and International are growing proprietary cards‐in‐force at more consistent levels (up 3% and 6%, respectively) and at higher average spend per card than has been seen before.

Ultimately, greater scale – in users and acceptance, across commercial payments and international markets – has the power to drive operating leverage and more sustainable EPS growth over the long‐term. Critical to this equation is Amex’s spend‐centric model, where fees are 80% of revenue, about 3‐4x the level of a “traditional” card company, and credit costs are just 1/5 the cost of total customer engagement spend (marketing, rewards, service) with the latter providing an important lever to throttle back and help sustain earnings in tougher times. Indeed, one thing that has stayed consistent with new management is the ability to contain costs, with OpEx roughly flat over the past year, even as Amex achieved double‐digit billings across its 3 major segments. With shares trading at just 12.5x our 2019E EPS, and 11x 2020E EPS, we think markets under‐appreciate the strategic pivot occurring at Amex and see shares trading above $135 over the next 18 months for a total return of 30% upside.

From Daniel Loeb (Trades, Portfolio)'s third-quarter 2018 Third Point shareholder letter.

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Mario Gabelli Comments on American Express - Sep 14, 2018

AmericanExpress (NYSE:AXP) (1.1%ofnetassetsasofJune30,2018)(AXP –$98.00 –NYSE) – is the largest closed loop credit card company in the world. The company operates its eponymous premiere branded payment network and lends to its largely affluent customer base. American Express has 113 million cards in force and nearly $70 billion in loans, while its customers charged over $1.1 trillion of spending on their cards in 2017. The company’s strong consumer brand has allowed American Express to enter the deposit gathering market as an alternate source of funding, while the company’s affluent customers have picked up spending. Longer term, American Express should capitalize on its higher spending customer base and continue to expand into other payment related businesses, such as corporate purchasing, while also growing in emerging markets. Similarly, the company is looking at the growing success of social media as an opportunity to expand its product base and payment options.



From Mario Gabelli (Trades, Portfolio)'s Gabelli Asset Fund second quarter 2018 shareholder letter.

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