CNBC’s Jim Cramer said Monday. american express The company prioritizes long-term growth over increasing earnings per share. That’s exactly why this stock is a buy.
“American Express is down more than 13% from its all-time highs reached at the end of last year,” the “Mad Money” host said. “I think this is a great opportunity for one of the best-run companies on the planet.”
Shares of the company fell more than 4% on Friday after the company reported higher-than-expected profits but maintained its full-year outlook. The stock rebounded 3% on Monday, but is still below its pre-earnings level and about 13% off its record high on Dec. 11. Cramer said the decline fits a well-known pattern that has repeatedly created attractive entry points for long-term investors.
“I think we have a great buying opportunity,” he said.
Mr. Kramer said investors were placing too much weight on the unchanged earnings outlook and not enough weight on management’s decision to reinvest profits back into the business. On an earnings call, CEO Steve Squery said American Express is choosing to invest in expanding cardmember benefits and other growth initiatives rather than accelerating share buybacks because “this is the (choice) that will create the most value for our shareholders over the long term.”
The strategy builds on last year’s revamp of the company’s Platinum Card, which management says is already seeing promising results. This card has a hefty annual fee, but it offers a wealth of travel, dining, and lifestyle benefits for wealthy individuals.
Kramer said those investments are already paying off. He said American Express achieved a 36% return on equity in the quarter, one of the highest in the financial sector. Return on equity measures how well a company uses shareholder funds to increase its net income. Squery also said, “Half a year into this year, we are seeing stronger momentum than expected.”
“Given Steve Squery’s track record, I think he deserves the benefit of the doubt here, which is why I would be a buyer,” Cramer said.
