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AmEx (AXP) to Bank on SMEs, Young Generation for Revenue Growth

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American Express Company (AXP - Free Report) recently presented its view of growing annual revenues by more than 10% in the long run in an investor day event. The company is focusing on small and medium-sized enterprises (SMEs) as well as young customers, as the demand is expected to grow rapidly from these two sections.

Rising credit card spending will likely buoy its future performance. While AXP expects the top line to grow 18-20% in 2022, the growth rate is expected to be stabilized at more than 10% in 2024 and beyond, as the economy reaches a steady state. The Zacks Consensus Estimate for the company’s top line is pegged at $50 billion for 2022. Further, the same for 2023 is $55.7 billion, indicating 11.4% year-over-year growth.

While AmEx expects earnings per share for 2022 within $9.25-$9.65, suggesting a decline from $10.02 in 2021, the metric is likely to rise in mid-teens in the long run. The Zacks Consensus Estimate for the company’s bottom line for 2022 is pegged at $9.72 per share. The consensus mark further implies a year-over-year jump of 17.9% in 2023 to $11.46. AXP expects to benefit from the pandemic recovery as the travel sector rebounds.

The company has witnessed an increase in spending levels from the younger generation in the past few months and expects the momentum to grow in the coming days. As the millennial and Gen-Z cardholders enter into their high earning years, demand for the company’s multiple financial products is expected to soar. This can become a pillar for AmEx’s growth in the future.

The tailwinds of the recovery from the pandemic are aiding the U.S. small-business bracket. As such, focusing on the SME client base while improving the company’s technology and customer services will likely result in portfolio growth. Growing merchant traction and digitization of payments will likely help AmEx grow in the long run amid intensifying competition in the payments market. The company intends to expand its U.S. network through advancing into new-to-plastic industries like buy now, pay later (“BNPL”) solutions.

Earlier this month, it extended its BNPL program ‘Plan It’ for the first time at one of its partner’s point of sale. While AmEx is committed to harnessing the growth opportunities of the BNPL market, competition is steadily growing. Other companies like Visa Inc. (V - Free Report) , Global Payments Inc. (GPN - Free Report) and Mastercard Incorporated (MA - Free Report) are also boosting their presence in the BNPL space, which grew rapidly during the pandemic.

Visa’s Installment solution was first launched as a pilot just before the pandemic and gradually expanded to the United States, Canada, Malaysia, and Russia. V’s solution was launched in Australia in 2021. A significant number of issuers, acquirers and fintechs utilize the Visa Installments Solution to help customers access BNPL options.

Mastercard expects to capture a sizeable chunk of the BNPL market with the Mastercard Installments program. MA expects BNPL estimated e-commerce transaction value to be $7.2 trillion by 2025. The service is expected to be initially launched across the United States, Australia and the U.K. Mastercard included more participants within the BNPL program to better serve customers.

Global Payments has enhanced installment solutions, which are expected to help merchants improve their checkout conversions and increase sales. Its installment payment solutions are expected to help any retailer reduce the cart abandonment rate. GPN has opted for partnerships to boost its BNPL presence.