American Express Has Slumped: Is It a Bargain or a Red Flag?

American Express (NYSE: AXP) has slipped 15% year-to-date as of February 27, pulling back from a 52-week high of $387.49 to around $315, while the broader market is essentially flat year-to-date. For long-term holders, the question is whether this is a dip worth buying or an early signal of something structural.

The Bear Case: Real Risks, Not Just Noise

The most immediate concern is Washington. During the Q4 earnings call, CEO Stephen Squeri addressed a proposed 10% credit card interest rate cap directly:

I don’t think a 10% credit card cap is the answer to that. I think it would reduce the number of cards ultimately in the marketplace. I think it would reduce line sizes… it just has this sort of effect of a downward spiral from my perspective.

While American Express is more insulated than pure lenders due to its fee-based model, the policy risk remains unresolved.

Macro headwinds compound the concern. The University of Michigan Consumer Sentiment Index sits at 56.6, down 12.5% year-over-year and approaching recessionary territory. Premium discretionary spending, which is the engine of the American Express model, tends to lag sentiment by one to three months.

Insider activity is also notable. Following the Q4 release, CEO Squeri sold 62,466 shares at roughly $352, with several other senior executives making significant sales. No discretionary insider buying occurred during the pullback.

At a forward P/E of around 19x, the valuation still prices in continued execution. Any stumble in 2026 spending data could reprice shares lower.

The Bull Case: Fundamentals Hold Up

The Q4 miss was narrow. Revenue of $18.98 billion missed estimates by just $130 million, and net income grew 13% year-over-year. Full-year 2025 EPS came in at $15.38, up 15%. The company raised its quarterly dividend by 16%, to $0.95 per share.

Spending trends remain healthy. CFO Christophe Le Caillec noted that luxury retail was up 15% and restaurant spending rose 9% in Q4. Millennial and Gen Z cardholders now represent the largest share of U.S. consumer spending, with the average new Platinum cardholder aged 33, providing a long growth runway.

Wells Fargo maintained its Overweight rating and a $425 price target after the February selloff. The consensus analyst target stands at $379.60, implying roughly 18% upside. Berkshire Hathaway has held American Express for decades, and under Greg Abel there is little reason to expect that conviction to waver.

Verdict

American Express’s fee-driven model, elite customer demographics, and consistent double-digit EPS growth distinguish it from pure credit lenders. However, the unresolved rate cap threat, softening consumer sentiment, and insider selling are factors analysts are watching closely. Q1 2026 spending data will be a key test: if card member spending decelerates meaningfully from the current 8% to 9% pace, the current valuation leaves little room for error.