Key Points
- Credit card stocks have been a story to watch as consumer sentiment continues to sour.
- Despite resilient spending, the stocks of Visa, Mastercard, and American Express have been heading in opposite directions.
- If the economy continues to go 'K-shaped', American Express stands as the potential winner in this industry.
Consumer delinquency rates are on the rise, and recent market volatility shows investors are on edge as economic worries drag sentiment down. Shares of Visa Inc. (NYSE: V) and Mastercard Inc. (NYSE: MA) have barely moved since April despite quality earnings, while American Express Co. (NYSE: AXP) has outperformed despite a Q3 revenue miss. Can AXP continue to lead the pack? It depends on which type of consumer feels the heat as 2026 approaches.
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Hints from Q3 Earnings on Consumer Strength
Actions speak louder than words, which is most accurate when discussing the U.S. consumer. Right now, sentiment is weak, with University of Michigan survey data pointing to deteriorating consumer expectations. However, though consumers are skittish, they’re still spending enough to keep the economy afloat.
According to the Federal Reserve's economic data, net credit card charge-off rates at commercial banks have dropped to 4.17%, nearly 50 basis points lower than the rate at this time last year. All three major credit card companies reported Q3 earnings in October, and each showed surprising consumer strength despite headwinds such as tariffs, high rates, and souring sentiment.
- American Express: In its Oct. 17 conference call, AXP reported a revenue miss but a strong EPS beat. Despite missing expectations, revenue still set a quarterly record, and the company raised full-year sales guidance to reflect 9-10% growth. Delinquencies and write-offs are below 2019 levels, thanks to the company’s affluent client base, and credit losses were down 5% year-over-year (YOY).
- Visa: A small EPS beat and massive revenue beat were the highlights of Visa’s fiscal Q4 2025 earnings call on Oct. 28, with net revenue up 11% YOY and EPS up 14% YOY. However, the company guided to lower-than-expected revenue growth and anticipates higher operating expenses in 2026.
- Mastercard: On Oct. 30, Mastercard also posted a top- and bottom-line beat for Q3 2025, including impressive revenue growth of 15% YOY. However, the Capital One migration remains a 2026 revenue headwind, and the company has a pricier valuation than its peers in the sector.
All three companies highlighted stronger-than-expected consumer spending across all income levels, even as those at the bottom tier became more cost-conscious. Resilient consumer spending is a tailwind for any financial company that earns transaction fees. Still, one of these credit card issuers is better positioned than the other two to win in this environment.
American Express Gains From Affluent Focus but Takes on More Risk
The K-Shaped economic narrative began to take shape following the April market reversal, after President Trump cancelled his calamitous Liberation Day tariffs. All three credit card stocks rebounded in May, but American Express began separating from the pack in early June.
This was one of the earliest signals that the economy was turning K-shaped, with affluent customers continuing to spend while lower and middle-class consumers became more frugal.
American Express earns lower margins than Visa or Mastercard, mainly because American Express acts as a bank as well as a card issuer. While Visa and Mastercard issue cards through banks and earn fees through transactions, American Express loans money directly.
Making loans opens up an additional revenue stream for American Express, but also an additional risk factor should an economic slowdown reach the higher tier of the K. If affluent customers stop paying their bills, American Express is on the hook for those payments, while Visa and Mastercard outsource that risk to other banks.
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Visa and Mastercard Are Susceptible to the Lower End of the “K”
Visa and Mastercard have a larger client base, but they earn less revenue because their clients are more spread out across the income spectrum, and they only make money through transaction fees. In addition to greater susceptibility to a slowdown in lower-end consumer spending, Mastercard and Visa also have starkly higher valuations than American Express, according to metrics such as Price-to-Earnings (P/E) and Price-to-Sales (P/S).
Mastercard currently trades at more than 33 times forward earnings and 15 times sales, while Visa is slightly cheaper at 29 times forward earnings and 15 times sales. Compare these valuations to American Express, which trades at just 23 times forward earnings and 3.5 times sales, and you can see why AXP has outperformed V and MA as the economy begins to bifurcate.
AXP Has Superior Metrics and Broader Tailwinds
American Express has a more attractive valuation, higher revenue, and more economic tailwinds than Visa or Mastercard, and these factors have boosted AXP shares nearly 40% since April. Is the rally getting overextended? Not according to the technical data on the daily stock chart.
Following a Golden Cross in June, the stock has built a strong support base along the 50-day SMA. Investors have also noticed an additional pattern over the last few months: selling when the Relative Strength Index (RSI) reaches Overbought and buying when the 50-day SMA is tested, a pattern that seems to be unfolding again now.
For V or MA to catch up to AXP, economic distress will need to seep into higher-income earners, or the company’s credit situation will need to deteriorate. Right now, neither of those scenarios seems imminent, so AXP will likely continue outperforming V and MA in the near term.
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