American Express Company

New York Stock Exchange
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Somewhat Bullish +30

American Express vs. Affirm: Which Payments Stock Has More Upside? - Zacks Investment Research

🔍 American Express (AXP) focuses on its closed-loop network and premium customers, while Affirm (AFRM) targets growth via installment-based lending at checkout.

💎 AXP's luxury retail spending rose 18% in the quarter, driven by resilience among higher-income consumers and improved Platinum portfolio trends.

📈 Over 70% of AXP's new accounts are tied to fee-paying products, supported by strong adoption from Millennials and Gen Z.

🛡️ Credit performance remains stable with delinquency rates below pre-pandemic levels, while Q1 2026 revenues grew 11% year over year.

💸 Elevated marketing and rewards investments keep AXP's expense base high, with total expenses rising 11% in Q1 2026.

🛍️ Affirm is diversifying its merchant network beyond large partners, increasing activity from smaller and emerging categories to deepen ecosystem penetration.

🤖 The Affirm Card is emerging as a key growth driver, expanding usage beyond point-of-sale financing through transparent 0% installment offerings.

🧠 Affirm utilizes AI tools like Boost AI for automated testing and underwriting to optimize conversion rates and risk assessment dynamically.

⚠️ Operating expenses for Affirm rose 15.5% year over year in the second quarter due to higher funding costs, credit provisions, and servicing expenses.

📉 Consensus estimates predict a massive 620% surge in Affirm's fiscal 2026 earnings per share, followed by 58.7% growth next year.

📊 Affirm's fiscal 2026 revenue is expected to grow by 28.5%, reflecting rapid expansion compared to AXP's steady trajectory.

🎯 For investors prioritizing rapid future gains over stability, Affirm currently offers the higher upside potential despite both holding Zacks Rank #3 (Hold).

Bullish Signals
  • American Express reported an 18% increase in luxury retail spending, reflecting strong resilience among higher-income consumers.
  • The U.S. Platinum portfolio at AXP shows improved spend trends following product refreshes with consistently high retention rates despite fee increases.
  • More than 70% of new accounts are tied to fee-paying products, reinforcing a strategic shift toward higher-value customers.
  • Millennial and Gen Z cohorts are meaningfully contributing to new account growth and spending, indicating strong resonance with younger demographics.
  • Credit performance remains robust with delinquency and write-off rates staying below pre-pandemic levels.
  • AXP total revenues increased 11% year over year in the first quarter of 2026, while total transactions rose 10% during the same period.
  • The company beat earnings in three of the past four quarters with an average positive surprise of 3.9%.
  • Affirm is leveraging artificial intelligence tools like Boost AI to automate A/B testing and optimize conversion rates for merchants.
  • Affirm has beaten earnings estimates in each of the past four quarters with an impressive average positive surprise of 83.5%.
  • Zacks Consensus Estimate predicts a massive 620% year-over-year EPS surge for Affirm in fiscal 2026, followed by 58.7% growth next year.
  • Consensus revenue expectations for Affirm suggest strong 28.5% growth for fiscal 2026.
Risk Factors
  • American Express experienced elevated expense growth with total expenses rising 11% in the first quarter of 2026 and 11.1% year over year in 2025.
  • Continued investments in marketing, rewards programs, and customer value propositions may keep AXP's expense base elevated relative to revenues.
  • Affirm Holdings faces a significant rise in total operating expenses of 15.5% year over year in the second quarter driven by higher funding costs, provision for credit losses, and processing expenses.
  • American Express beat earnings estimates in three of the past four quarters but missed once, showing volatility in earnings performance.
Full Analysis
American Express (AXP) and Affirm Holdings (AFRM) operate within the overlapping consumer finance landscape but utilize distinct business models to drive transaction growth. AXP focuses on its closed-loop network, premium customer base, and revolving credit model, which has shown resilience with luxury retail spending rising 18% in the quarter. The company's U.S. Platinum portfolio has seen improved spend trends following product refreshes, supported by high retention rates even after fee increases. Customer acquisition is strengthening as over 70% of new accounts are tied to fee-paying products, while credit performance remains stable with delinquency and write-off rates below pre-pandemic levels. In the first quarter of 2026, AXP's total revenues increased 11% year over year, total transactions rose 10%, and the company beat earnings in three of the past four quarters. However, elevated expenses relative to revenues persist due to investments in marketing and rewards programs, with total expenses increasing 11% in the first quarter of 2026 after rising 6% in 2024. In contrast, Affirm emphasizes installment-based lending embedded at checkout through merchant partnerships, leveraging a broader mix of merchants including smaller and emerging categories to diversify its activity. The company is integrating artificial intelligence into its platform for automated optimization and risk assessment, with tools like Boost AI enabling efficient allocation of promotional spend. Its core proposition of buy-now-pay-later services, particularly 0% installment financing, continues to drive conversion rates and repeat usage, aided by the emerging Affirm Card product which expands usage beyond point-of-sale financing. Despite growth in its user base, Affirm faces rising total operating expenses that increased 15.5% year over year in the second quarter due to higher funding costs, credit loss provisions, and servicing expenses. Investment analysis suggests different trajectories for both stocks based on growth potential versus stability. Zacks Consensus Estimates project a significant 620% year-over-year surge in Affirm's fiscal 2026 earnings per share (EPS), followed by 58.7% growth the following year, alongside estimated revenue growth of 28.5%. While AXP offers stability with consistent earnings beats averaging 3.9% surprise, AFRM has shown stronger recent performance by beating estimates in each of the past four quarters with an average surprise of 83.5%. Both companies currently carry a Zacks Rank #3 (Hold), yet for investors seeking rapid future gains rather than stability, Affirm is noted to have the edge at the moment due to its projected expansion and diversified revenue streams across a growing merchant network.