Key Points
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American Express is the second-largest position in Berkshire Hathaway’s stock portfolio, trailing only Apple.
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Cardholder spending rose 10% in the first quarter, with Millennials and Gen Z leading the way.
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After a multiyear run, the stock trades at a richer valuation than investors are used to paying.
- 10 stocks we like better than American Express ›
When Warren Buffett handed the chief executive job at Berkshire Hathaway to Greg Abel at the start of this year, he stepped back to the role of chairman and left behind a stock portfolio built around a few enormous bets. The biggest is Apple. The second is American Express (NYSE: AXP), which now makes up about 17% of Berkshire’s equity holdings and stands as one of Buffett’s longest-held stocks.
It has been a rewarding place to sit. American Express stock has more than doubled over the past five years, and it recently traded around $350 as of this writing, not far below the record high near $382 it set in December. So the question worth asking today is a simple one: With the shares this high, is it too late to buy, or does the current valuation still leave room for more?
A premium model that keeps working
American Express isn’t an ordinary card company. It runs what’s called a closed-loop network, meaning it issues the cards, handles the transactions, and lends to many of its customers. Even more, it collects an annual fee from members and a cut of everything they spend. And that spend-centric model leans on affluent cardholders who charge a lot and tend to pay their bills, the kind of customer base that holds up relatively well when the economy softens. Those annual fees also recur, and they often see an increase when Amex refreshes a card, creating a stream of high-margin revenue that grows as the cardmember base expands.
The first quarter of 2026 showed the formula still working. Revenue rose 11% year over year to about $18.9 billion, and earnings per share climbed 18%. Billed business — the total amount members charged to their cards — rose 10%, a strong pace for a company this size.
More telling is who is doing the spending. Millennial and Gen Z members have become Amex’s fastest-growing group, and globally more than 70% of new accounts are now on fee-paying products. That pushes back on the old assumption that American Express is a brand for an older customer base. Better still, those younger members come with years, even decades, of prime spending ahead of them.
“Within our U.S. Platinum portfolio, we are seeing accelerated spend growth following the refresh while maintaining high retention rates after the fee increases went into effect,” Chairman and CEO Stephen Squeri said on the company’s first-quarter earnings call.
Credit quality, the risk that can hurt a lender fastest, stayed in good shape too. The net write-off rate on U.S. consumer card balances was about 1.9% in the quarter, and balances at least 30 days past due sat near 1.3% — both still below where they were before the pandemic, with the write-off rate down and delinquencies flat from a year earlier. For now, there’s little sign of the borrower stress you might expect this late in an economic cycle.
The price of a great business
But a business of this caliber rarely stays cheap, and American Express no longer is. Based on its recent price and the past year’s earnings, the stock trades at a price-to-earnings ratio of about 22. Measured against management’s guidance for full-year earnings per share of $17.30 to $17.90, the forward price-to-earnings ratio is about 20.
Neither figure is outrageous. But both sit well above the low-to-mid-teens multiple Amex carried for much of the past decade, when it was still treated more like a cheap value stock than a premium franchise. Investors are paying up for quality now, not buying it on sale.
Is that a problem? Not necessarily. Management expects earnings per share to grow about 15% this year, and the company keeps buying back stock while paying a dividend that yields about 1.1%. A business compounding earnings in the mid-teens can grow into a 20-times multiple over time, even if the multiple never expands again.
But that is the crux of it. The easy money in American Express — the part that came from a cheap stock rerating higher as Buffett’s original thesis played out — has largely been made. From here, the returns have to come from the business itself: more spending, more fee-paying members, and loan losses staying low.
Fortunately, that’s what Amex is delivering, with second-quarter results due later this month, on July 24, to test the trend again. So while I wouldn’t count on the stock repeating its strong five-year run, I think it’s still a reasonable buy for patient investors who want a high-quality compounder and don’t mind paying a fair — rather than cheap — price. Just go in knowing the bargain days are probably behind it.
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American Express is an advertising partner of Motley Fool Money. Daniel Sparks and his clients have positions in Apple and Berkshire Hathaway. The Motley Fool has positions in and recommends American Express, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.
