‘Don’t leave home without it.’
That of course is the famous American Express slogan created in 1975. It’s one of the most memorable and successful ad campaigns of all time which has featured Jerry Seinfeld, Stephen King and others. Unfortunately for American Express (AXP), when it comes to their cards, more and more Americans are in fact, leaving home without it.
Right now, the $66 billion credit card behemoth is struggling to maintain profitability. A serious competitor in JPMorgan has emerged. It’s stealing market share. Executives at American Express know it. As Financials analyst Josh Steiner highlights in the video above, take a look at the chart of AmEx executive’s insider buying going back to 1997.
It reveals a rather interesting trend:
“What I think is interesting is look at all the buying from 2003 to early 2011. The point I want to make is how that stands in sharp contrast to where we are today. In the last six years, only two people at American Express have come out and bought stock in the open market. Back ten or twelve years ago, there was a very clear opportunity to those in high places within American Express and today I think the opposite is the case.”
Steiner lays out the three primary reasons why he thinks AmEx executives aren’t buying the company’s stock:
- Slowing Volume – Billed business volume growth has been decelerating over the last half decade and is inexorably converging upon zero growth. There are numerous moving parts here, but we endeavor to keep it simple.
- Accelerating Pricing Pressure – pricing pressure is the unstoppable force for Amex and is an underappreciated risk, especially when combined with the aforementioned slowdown in volume growth. Pricing pressure is growing on multiple fronts and is poised worsen at an accelerating rate.
- Other Headwinds = $ ↑, Competition ↑, Valuation ↑ – The post-Trump strong dollar, rising rate environment is not helpful for Amex. Neither is the 20% rise in the stock in the last month. But the biggest challenge by far facing the company is the enormous growth in major competition.
BOTTOM LINE: SELL AMERICAN EXPRESS.
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