The drop may have been due to the passage of the GENIUS Act stablecoin bill.
Credit card company American Express (NYSE:) generated record revenue and beat earnings estimates in the second quarter, yet the stock was trending about 3% lower on Friday.
It likely wasn’t due to its earnings report or even its outlook for the rest of 2025. It was more likely stems from the recently passed GENIUS Act in Congress, which establishes a regulatory framework for stablecoins.
Before sorting that out, let’s look at the second quarter earnings results. American Express posted record revenue of $17.86 billion in Q2, which was up 9% year over year. That was better than estimates of $17.7 billion.
Net income was down 4% to $2.89 billion, while earnings were off 2% to $4.08 per share. But those results were slightly skewed by a 66 cents per share gain in Q2 2024 from the company’s sale of Accertify. On an adjusted basis, earnings were up 17% year over year. They were also well ahead of estimates of $3.87 per share.
“We saw record Card Member spending in the quarter, demand for our premium products was strong, and our credit performance remained best in class,” Stephen Squeri, American Express chairman and CEO, said.
Big Spenders
While there was a lot of data and discussion about flagging consumer confidence in Q2, American Express did not see it. Then again, American Express caters to a more affluent customer base than its competitors, and wealthier individuals are less impacted by economic uncertainty, inflation, high interest rates, and a slowing economy.
American Express saw its discount revenue – or fees from swipes — increase 6% to $9.4 billion while its card fees rose 20% to $2.5 billion.
Further, its interest income from loans lent out for credit purchases grew 8% in the quarter to $6.3 billion.
Also, its network volumes, money spent on its network, rose 9% to $472 billion, while the amount it loaned out for purchases increased 9% to $142.3 billion. In addition, the total number of AmEx cards in force jumped 4% to 149.4 million with the average fee per card rising 16% to $117.
Its provision for credit losses rose 11% to $1.4 billion, but its net write-offs of bad loans dropped to 2.2%, from 2.4%. Also, its rate of loans that are more than 30 days past due is 1.3%, up from 1.2% a year ago.
Investors Concerned About Stablecoins Bill
Another positive from American Express’s Q2 report was its outlook, as the company maintained its guidance for the rest of 2025.
“Based on our strong performance year to date, we are reaffirming our full-year guidance for revenue growth of 8 to 10% and EPS of $15.00 to $15.50,” Squeri said.
The catalyst for the selloff may have been the passage of the GENIUS Act on Thursday by the House. This bill that regulates stablecoins – digital currency pegged to the US dollar, is expected to open up the industry to all sorts of players, not just banks.
As the Wall Street Journal reported last month, major retailers like Walmart (NYSE:) and Amazon (NASDAQ:), and others, like Expedia (NASDAQ:) and some airlines, have all discussed the possibility of issuing their own stablecoins. As the Journal surmises, that could potentially be a threat to payment networks, like American Express.
With the GENIUS Act passing in the House and heading to the president’s desk to be signed into law, these concerns may have come to the fore among investors.
Of course, it is too early to know what impact it will have, and this is investor speculation at this point.
American Express has been a great company and is one of just four major credit/payment networks, so it has a fairly wide moat. Within that group of four, it really has its own singular niche of catering to more affluent investors. So, any impact from the GENIUS Act could be overblown.
American Express stock has had some very recent price target upgrades, and it has a median price target of $327 per share, suggesting 8% upside. It is also reasonably valued with a P/E of 22. It still looks like a solid option, as it has been for a long time.