One only has to read “The 5 Worst Stocks in the Dow Jones” to get an idea of AXP’s problems. American Express is one of the world’s top consumer brands, a global bank, 3 party payment network, rewards scheme, a talent powerhouse, …etc. It’s just amazing to me to see AXP trade at 11 times earnings (~$6B EBITDA) at market cap of $61B while Vantiv trades at 44 times, Paypal at 35x and market cap of $40B.
I’m not saying the market is wrong, but rather Amex has all of the pieces to be great.. the right brand operating in the right model at the right time.. but no ability to change. Amex has a CEO problem… a leadership problem… and a culture problem. Most know that their multiple hit was due to Costco loss.. in essence the market no longer trusts the management team. A must read is Bloomberg’s Article “How Bad Will It Get for Amex”. Its like a new chapter in Innovators Dilemma… when you are at the top of the market and there is no where left to go.. what do you do?
Amex’s assets are the envy of the payments world. How can Amex deploy them? I honestly believe Amex has 100 revenue generating projects it could do tomorrow. Better yet, they have 100 capable executives that could run each of them. Amex must learn to pivot from a company managing a cash cow with no risk and in control of everything ….to a platform that can enable 100s of other businesses. Their example should be wirecard (ETR: WDI) a company that has learned to white label several of its core business components.. I call WDI a mixture of Amazon APIs and Citibank.
American Express has a great integrated value proposition at the top. To grow in the middle they must deconstruct their services and give many 3rd parties access…. A prepaid card in Brazil.. an enhance loyalty platform for retailer… a business payments utility in Africa…
Amex must move from a position of “control” to an enabler of retail, banking and payments. They cannot do this organically… thus I’m making bets that they will use some of their $20B in cash to acquire…. Before they become the western union of payment cards..
Amex needs a new CEO…
My top picks for the job? (who they NEED.. not who they can get). Criteria: Payments, banking, international, issuance, technology, change, partnerships, data, consumer branding, regulatory, … My short list
- Judd Linville.. top Amex Alum now CEO of Citi Cards
- Dan Schulman.. Former #2.. now CEO of Paypal. Amex would need to buy Paypal for this to work.. that indeed would be a fun conversation…
- Skipping CEOs of Visa/MA.. as they are far too successful to go down to a lesser business like AXP
- Osama Bedier … Top 5 Payments Executives on the Planet.. and former head of engineering at Paypal
- Vicky Bindra – Former CEO of MA APMEA / Citi Global Consumer
- Stephen Bryd – CEO of Citi Retail
- Bill Wallace – Chase
- Bob Dimon – Former CEO of Barclays