The “Magnificent Seven” have been all the rage in the stock market for several years now. For those unfamiliar with the term, the Magnificent Seven stocks include Apple, Alphabet, Amazon, Meta Platforms, Nvidia, Microsoft, and Tesla. These companies are worth trillions of dollars, and have their nose in almost every major industry across the modern technology sector, from smartphones to data centers.
These stocks have carried the broader market for a while now, but nothing lasts forever. At some point, companies become too large to continue growing so easily. It could be wise to move on and look elsewhere for stocks that can help carry a portfolio over the coming years. One sizzling candidate is financial stock American Express (AXP 0.73%).
Most investors know American Express stock for its premium credit cards, but its closed-loop business model includes its own payment network and lending, which together complete the credit card ecosystem. American Express has been around for decades, but here’s why it should grab your attention now and moving forward.
Image source: The Motley Fool.
Embracing the next generation of spenders
Credit card borrowing is a pillar of the U.S. economy. Today, credit card debt among U.S. households stands at a whopping $1.25 trillion, near an all-time high. Over the coming years, spending power will shift from today’s older, more financially established consumers to younger workers in the millennial and Gen Z demographics.
American Express is already embracing the trend. Young spenders are living in the moment more amid inflation and high housing costs. American Express’ premium charge cards, Gold and Platinum, charge hefty annual fees but offer various perks and credits for lifestyle spending, such as dining and air travel.
These financial products have resonated with the new generations. Millennials and Gen Z have accounted for the highest percentage of American Express’ new customers over the past several years, and the group recently became the company’s largest share of consumer card spending in the United States.
Today’s Change
(-0.73%) $-2.27
Current Price
$311.26
Key Data Points
Market Cap
$214B
Day’s Range
$310.35 – $313.69
52wk Range
$286.15 – $387.49
Volume
20.4K
Avg Vol
3.4M
Gross Margin
60.19%
Dividend Yield
1.09%
The future looks bright as a result
Similar to advertising or any business that counts on consumers spending more, the up-and-coming consumer is the most valuable and desired customer. American Express’ success in attracting young spenders will bode well for its long-term growth. Currently, analysts expect the company’s earnings to grow at a brisk 14% annualized rate over the next three to five years.
That growth outlook makes the stock attractive at its current 18 times 2026 earnings multiple. There is risk, though. As the lender, American Express would suffer if customers didn’t pay their bills. That said, American Express is a premium credit card brand that tends to attract customers with higher credit scores, and its CEO has said that its younger borrowers have an average credit score of 750 and lower default rates.
American Express may not have the same sizzle that the Magnificent Seven stocks do. Still, it’s a beloved consumer brand with an inside track on the spending habits of America’s most lucrative consumer group. That should work wonders for the stock and its shareholders for a long time to come.
American Express is an advertising partner of Motley Fool Money. Justin Pope has positions in Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, American Express, Apple, Meta Platforms, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
