Shares of American Express (AXP) have hit an all-time high as February's retail sales report showed signs of strength among consumers and credit card purchases rose. In an annual letter to shareholders, American Express CEO Stephen Squeri announced the company will emphasize generative AI to enhance the customer experience.
Yahoo Finance Executive Editor Brian Sozzi joins the Live show to break down Squeri's statement and how the payment card company is broaching growth.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino
Video Transcript
BRAD SMITH: Well, MasterCard shares hitting an all-time high this week. February retail sales report out this week also suggested consumers are still spending big, and credit-card companies out there are able to take advantage of that thirst to consume.
This as MasterCard's top competitor, American Express, has added over $18 billion of sales since 2021, according to its newly filed annual report.
Yahoo Finance the first to get access to the chairman and CEO's annual letter to shareholders out today. In it, Stephen Squeri emphasizing the company's focus on generative AI to enhance the customer experience.
For more on this, let's bring in Yahoo Finance's executive editor Brian Sozzi. Hey, Brian.
BRIAN SOZZI: Yeah, it was a good read by Stephen Squeri. Really calling out two things for me in going through this letter. One, as you mentioned at the top, Brad, a big focus on generative AI inside the company. Steve has formed a team to really think deeply on how gen AI not only will impact how the company functions internally but how gen AI will impact that customer or consumer-facing experience.
And number two, one number that caught my attention going down the release is this year American Express is supposed to release about 40 new products or improvements on existing products. Last year, they did 20. So essentially they're doubling the number of maybe services that are tied to American Express this year. So all of that is pretty interesting. Maybe it leads to better results.
Overall, Squeri's letter-- of course, Squeri also told me this on general gen AI, which I thought was very fascinating. Again, more on developing that team this year and then how he thinks about how gen AI will impact that customer experience. I think they're going to be adding a lot of coders inside American Express over the next 5 to 10 years. But again, Squeri, that's what he's telling me in an exclusive conversation.
But this all got me going back to look at some of the financials over at American Express. Recently filed an annual report. I love reading annual reports. I know everybody's always fixated on the 8-K and the 10-Q because they're of the moment, but the 10-K, the annual report for a company, especially a company-- storied company like American Express, really gives a good snapshot into how they grow over a longer period of time, and I was really blown away by some numbers here. Just zooming out, $18 billion in sales added since 2021. Cash pile up almost $25 billion since 2021. More than $1 earnings added since 2021, and they added 20 million more cards in force than 2021. That's some big growth numbers for a company that's been around, I believe, since 1850.
And then if you're thinking about-- and like, Brad, you mentioned, American Express just off its record highs. You had Visa trading near its record highs. MasterCard touching all-time high. If you're an investor and you want to get involved in these stocks, now you want to be thinking about, how can they deliver up to these high expectations from the Street? What else could be added to this card set to further accelerate sales and earnings over the next few years?
And then lastly, I know we've gotten some good reads on the consumer here. Notably this week, maybe the retail sales report wasn't that bad, but can this pace of sales and spending on services, can it continue at this rate? One of the biggest growth areas right now and it has become the biggest growth area for American Express is actually dining within their transit and entertainment side of the business. Can these things continue? because they have been driving the stock over the past two years. Unclear to me, but for right now, they seem to be doing pretty well.
SEANA SMITH: Yeah, Brian, digging into that last point that you were just making, I think so many people are asking if we do see a bit more of a slowdown if we're in this higher-for-longer environment than maybe what the Street is forecasting at this point. The pressure that we typically see on names like American Express or names like Visa or MasterCard, how does that stack up to the outperformance that we have seen over the last couple of quarters?
BRIAN SOZZI: I'm glad you asked that, Seana, because I'm also thinking why these stocks are trading near record highs is, yeah, the spending numbers have been good, but they're really being viewed as defensive-type plays. The moats around Visa, MasterCard, and American Express is significant. A couple of weeks ago, I got to spend some time with Visa's new CEO and hear what he's thinking about digital coins and crypto and overseas growth is fascinating, and I can't find a lot of companies that are doing what these three companies are doing, nor is there any chance of any company at least coming out today catching any three of these companies over the next 10, 15, 20 years.
BRAD SMITH: When you think about that revenue figure, just lastly while we have you, I was looking back to perhaps the best prepandemic marker that we have in 2019. And even though we saw that growth that you cited a moment ago versus 2021, I mean, it still seems like many of these companies are trying to get these growth numbers lapping the prepandemic markers as well where the revenues in total were actually higher than that 2021 figure.
BRIAN SOZZI: That's a good point. I didn't go back to 2020 because it would, I think, show even more just higher periods of growth. To me, 2021 to 2023 is a real good snapshot on how these businesses have been doing postpandemic.
But to your point, Brad, there is an opportunity to get back to where it was as more-- as more just workers, let's say in the case of American Express, come back to offices. There's more entertainment. There's more services they can spend on these corporate cards, and they get back to the way they were growing beforehand, but it will take time. I mean, the pandemic has fundamentally changed a lot of companies, and these cardholders are one of them.
Not everybody is back in the office. Not everybody-- and those back in the office are not spending the way they were as they did prepandemic.
SEANA SMITH: All right, Sozz, great stuff.
BRIAN SOZZI: Thanks. Appreciate it.
SEANA SMITH: Thanks for coming on set with us.
