Selling American Express stock after Q3 report is ‘stupid’: Cramer

American Express Company (NYSE: AXP) is trading down on Friday even though it reported a strong quarter and raised its guidance for the future.

Cramer’s bull case for American Express stock

Investors seem to have been put off by $779 million worth of provisions for credit losses – million higher than expected.

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But that isn’t enough to discourage Jim Cramer from recommending buying American Express stock. On CNBC’s “Squawk on the Street”, he said:

The growth is so far ahead, it’s extraordinary. I think the people who’re selling it are stupid. I don’t get the negativity versus the banks. I see tremendous growth of Gen Z, Millennial, there’s incredible overseas. Provision is not nearly as bad.

Another possible let down for investors was the outlook. Even though American Express raised its guidance, what it’s expecting is still considerably below the Street estimates.

It’s now projecting EPS to fall between $9.25 and $9.65 this year versus analysts at $9.92. The payment card company continues to see up to 25% annualised growth in revenue.

American Express Q3 earnings snapshot

Earned $1.88 billion versus the year-ago $1.83 billion
Per-share earnings climbed from $2.27 to $2.47
Revenue jumped 24% year-on-year to $13.56 billion
Consensus was $2.40 a share on $13.52 billion revenue

Travel and entertainment drove the growth

American Express attributed the strong results primarily to increased spending on travel and entertainment that was up 57% versus last year. In the earnings press release, CEO Stephen Squeri said:

We continue to attract new, premium customers through our differentiated value propositions, experiences and services. We added 3.3 million proprietary cards in the quarter. Millennials and Gen Z are our fastest growing demographic.

In international markets, travel and entertainment related spending volumes topped pre-pandemic levels this quarter. American Express stock is currently trading near its year-to-date low.