Key Points

American Express continues to show strong performance even in a tough economic climate.
Revenue from card fees is expanding at a quicker pace than overall spending.
Shares of American Express appear attractively valued for purchase.
10 stocks we like better than American Express ›

American Express (NYSE: AXP) shares have declined during the year amid market concerns over interest rates, inflation, oil prices, and their potential effects on the economy. Despite this, the company favored by Warren Buffett keeps posting increases and positive trends. Could the concerns be misplaced?

This is the reason growth in card fees holds greater importance than growth in spending at present, along with expectations for the firm's second quarter results due on July 24.

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Image source: American Express.

Resilient business approach amid rising prices

Although not the biggest credit card network globally, American Express focuses on wealthier customers who spend more. Its model relies on fees for most cards, drawing higher income users. Even with only 155.9 million cards active, its income surpasses that of Visa (NYSE: V), which handles around 5 billion cards around the world.

Data by YCharts.

This approach proves effective and offers stability in difficult economic times due to a steady income source that boosts profits directly. Members pay the yearly fee regardless of their shopping habits. There have been instances where even its big spenders faced difficulties, yet the fee structure offered a buffer.

Performance has remained strong so far despite economic headwinds. During the first quarter of 2026, income rose 11% from the prior year, and card fees, making up 14.5% of revenue, climbed 18%. Billed business grew 10%. Earnings per share increased 18% to $4.28, and analysts anticipate $4.40 for the second quarter, representing a 7.8% yearly gain.

Upcoming expansion driver

Its effective shift toward younger consumers, who are adopting the ongoing model, also contributes. Millennials made up 30% of the total in the first quarter with a 13% rise, whereas Gen Z cardholders represented 6% but surged 38%. This differs from Gen X members at 36% with 8% growth. These users are poised to deliver extended expansion as they use the service, pay fees, and make purchases.

American Express resembles a subscription service more than a transaction volume business, allowing it to handle difficulties better than Visa, which earns a tiny percentage on each transaction. Reduced transactions hurt Visa's income, but for Amex, increased activity enhances results while it still profits.

It also trades at a lower valuation than Visa, at 21 times trailing twelve month sales versus 31 for Visa. This may explain Buffett's stronger preference and suggests it could be undervalued as a subscription style business at current levels.

Is American Express stock a good buy at this time?

Prior to purchasing American Express shares, review the following:

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American Express is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in American Express. The Motley Fool has positions in and recommends American Express and Visa. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.