American Express (NYSE:AXP) has been one of my favorite brands. Their card offerings, when it comes to traveling, concierge, customer service and luxury, are truly unique. Their innovation in technology, global brand awareness and consistency of solid dividend payments made the company a good stock to hold in a diversified portfolio. Heck, I have been a member of theirs since 2002! And it is also a well-known favorite of Warren Buffett's, who has around a $8B stake in Amex.
However, in 2015, American Express took a big punch in the face when it lost its partnership with Costco (COST) to Citi (C) and Visa (V). Soon after that, JetBlue (JBLU) and Fidelity also cut their ties with Amex. Furthermore, in 2015 Amex also lost an antitrust lawsuit on merchant rules that businesses who accept American Express are allowed to encourage their customer to use other cards; but in September 2016, a federal appeal court ruled that Amex did not violate antitrust laws.
The result of all these negative impacts? AXP is by far the worst performer of the Dow Jones index in the past two years, and when you compare it to the S&P 500 index, the difference is huge. The stock is down by 30% since 2015 and more than 20% in 2016.
The stock has looked so ugly for the past two years that pretty much nobody on Wall Street wants to touch it. Even Jeff Ubben, the famous activist hedge fund manager who took a $1B position in AXP in the second half of 2015, decided to exit earlier this year.
Just when everyone thought that AXP is done, the company reported its Q3 2016 earning on 10/19, and it blew away the market's expectations. Here are some of the key bullish points:
- $1.20EPS (Actual) vs 0.97 EPS (Expected)
