Does American Express Stock Represent Undervalued Opportunity?

Besides lending money to clients by its credit cards, the company also takes in some deposits as well, incurring some interest expenses along the way. The net interest income during the first quarter of 2020 has reached $2,330 million. This was around 13% higher than back in 2019. Finally, the net income of the company stood at $367 million, which was 76% lower than a year ago, when it reached $1,550.

Under normal circumstances, those would have been very disappointing results. However, considering the tremendous economic damage brought by the COVID-19 pandemic, those results still show the resilience of the business. Here it is worth noting that despite all of those challenges the American Express Corporation did manage to retain its profitability.

At the same time, the fall in the company revenue was not as sharp as in the case of many other businesses. Therefore the firm is well-positioned to recover from this economic downturn and regain its former level of profitability.

However, here it is important to mention that the second quarter results are not yet published. This will cover the company’s earnings during April, May, and June. Obviously, most likely this period was heavily affected by the lockdowns and travel restrictions.

Therefore, one can not rule out that the second quarter results might reveal some heavy losses for the firm. It can be worse than the first quarter result. Consequently, it might be better to wait for the latest earnings release in order to get a full picture of the company’s financial position. In this way, traders can protect themselves easily from potential surprise market moves in response to the latest quarterly results.

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