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Leverage on the Rocks: Can Gen Z & Millennials Keep AmEx Premium?
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Key Takeaways
AmEx pairs high leverage with strong liquidity to boost returns while managing cycle pressures.
Younger users drove 64% of 3.2M new cards as AmEx targets future premium cohorts.
Deep hospitality integration strengthens AmEx's brand and appeal versus payments-only rivals.
American Express Company (AXP - Free Report) , also known as AmEx, holds a distinct position in the payments world. Unlike Visa Inc. (V - Free Report) and Mastercard Incorporated (MA - Free Report) , which operate asset-light networks, AmEx carries loans on its own balance sheet. That structure makes leverage a strategic tool when credit conditions are healthy. Borrowed capital boosts earnings on every dollar of equity, while a sizable cash and liquidity reserve provides protection when the environment tightens. In practice, AmEx uses debt to power returns and liquidity to absorb volatility rather than to survive it.
AXP’s long-term debt-to-capital of 64.1% stands above the industry average of 43.5%. As of Sept. 30, 2025, long-term debt reached $57.8 billion, with $1.4 billion in short-term borrowings. Cash and cash equivalents of $54.7 billion rose sharply from $40.6 billion at the end of 2024, underscoring a defensible liquidity cushion. In a favorable cycle, this combination drives high returns. When the cycle turns, it pressures margins but avoids survival risk.
The more interesting shift is AmEx’s aggressive push into Gen Z and Millennial acquisition. Younger customers initially appear riskier than the legacy premium base: thin credit histories, higher lifestyle volatility and faster charge-off curves. The risk is real, but the company is not chasing mass volume. It is cultivating future premium cohorts with higher lifetime values: young professionals, early-career high earners and aspirational travelers with rising income trajectories. In the third quarter, AmEx issued 3.2 million new proprietary cards, and 64% went to Millennials and Gen Z.
Risk management reflects the balance sheet model. AmEx uses lower initial limits, rich behavioral data from its closed-loop network and gradual underwriting that scales with proven spend. Slightly higher seasoning losses are treated as investments in long lifetime value, supported by fee revenue and premium engagement. In short, the brand is expanding without diluting quality.
AmEx’s Advantage Over Visa & Mastercard
AmEx also differentiates itself from Visa and Mastercard by integrating deeply into the hospitality journey, from reservation to service. Partnerships and platforms enable curated dining experiences, including real-time preference insights for restaurants. This end-to-end control creates emotional loyalty rather than transactional convenience, strengthening AmEx’s premium identity and making the brand increasingly magnetic for younger consumers. Visa and Mastercard, as payments-focused networks, do not have similar consumer-facing reaches.
AmEx’s Price Performance, Valuation & Estimates
Shares of AXP have gained 22.1% in the year-to-date period against the industry’s decline of 3.7%.
Image Source: Zacks Investment Research
From a valuation standpoint, AmEx trades at a forward price-to-earnings ratio of 20.80X, down from the industry average of 24.32X. AXP carries a Value Score of C.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for AmEx’s 2025 earnings is pegged at $15.43 per share, implying a 15.6% jump from the year-ago period.
Image: Bigstock
Leverage on the Rocks: Can Gen Z & Millennials Keep AmEx Premium?
Key Takeaways
American Express Company (AXP - Free Report) , also known as AmEx, holds a distinct position in the payments world. Unlike Visa Inc. (V - Free Report) and Mastercard Incorporated (MA - Free Report) , which operate asset-light networks, AmEx carries loans on its own balance sheet. That structure makes leverage a strategic tool when credit conditions are healthy. Borrowed capital boosts earnings on every dollar of equity, while a sizable cash and liquidity reserve provides protection when the environment tightens. In practice, AmEx uses debt to power returns and liquidity to absorb volatility rather than to survive it.
AXP’s long-term debt-to-capital of 64.1% stands above the industry average of 43.5%. As of Sept. 30, 2025, long-term debt reached $57.8 billion, with $1.4 billion in short-term borrowings. Cash and cash equivalents of $54.7 billion rose sharply from $40.6 billion at the end of 2024, underscoring a defensible liquidity cushion. In a favorable cycle, this combination drives high returns. When the cycle turns, it pressures margins but avoids survival risk.
The more interesting shift is AmEx’s aggressive push into Gen Z and Millennial acquisition. Younger customers initially appear riskier than the legacy premium base: thin credit histories, higher lifestyle volatility and faster charge-off curves. The risk is real, but the company is not chasing mass volume. It is cultivating future premium cohorts with higher lifetime values: young professionals, early-career high earners and aspirational travelers with rising income trajectories. In the third quarter, AmEx issued 3.2 million new proprietary cards, and 64% went to Millennials and Gen Z.
Risk management reflects the balance sheet model. AmEx uses lower initial limits, rich behavioral data from its closed-loop network and gradual underwriting that scales with proven spend. Slightly higher seasoning losses are treated as investments in long lifetime value, supported by fee revenue and premium engagement. In short, the brand is expanding without diluting quality.
AmEx’s Advantage Over Visa & Mastercard
AmEx also differentiates itself from Visa and Mastercard by integrating deeply into the hospitality journey, from reservation to service. Partnerships and platforms enable curated dining experiences, including real-time preference insights for restaurants. This end-to-end control creates emotional loyalty rather than transactional convenience, strengthening AmEx’s premium identity and making the brand increasingly magnetic for younger consumers. Visa and Mastercard, as payments-focused networks, do not have similar consumer-facing reaches.
AmEx’s Price Performance, Valuation & Estimates
Shares of AXP have gained 22.1% in the year-to-date period against the industry’s decline of 3.7%.
From a valuation standpoint, AmEx trades at a forward price-to-earnings ratio of 20.80X, down from the industry average of 24.32X. AXP carries a Value Score of C.
The Zacks Consensus Estimate for AmEx’s 2025 earnings is pegged at $15.43 per share, implying a 15.6% jump from the year-ago period.
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.