Case Study: What Credible analysts are saying on JP Morgan (JPM) stock
Key Points
Performance
JPMorgan (JPM) shares sunk by nearly 4% this week. On a year-to-date basis, JPM shares are now down by -0.03%. This compares favorably to the S&P 500, which is up by approximately 3.88% during 2023 thus far.
Event & Impact
JPMorgan announced Q4 results last Friday, beating Wall Street’s expectations on the top and bottom lines. JPM posted Q4 revenue of $34.5 billion (up by 17.9% on a year-over-year basis), beating consensus estimates by $270 million. The company’s non-GAAP earnings-per-share came in at $3.56/share, beating Wall Street’s estimate by $0.46/share.
Noteworthy News:
JPMorgan’s quarterly data showed that a consumer slowdown hasn’t occurred yet, with credit card spending up 12% and overall loans on cards up 20% on a year-over-year basis.
Nobias Insights
55% of recent articles published by credible authors focused on JPM shares offer a “neutral” bias. 4 out of the 7 credible Wall Street analysts who cover JPMorgan believe shares are likely to fall in value. Yet, the average price target being applied to JPM by these credible analysts is $139.57, which implies upside potential of approximately 3.3% relative to the stock’s current share price of $135.08.
Bullish Take Harrison Miller, a Nobias 4-star rated author, said, “JPMorgan earnings rose 7% to $3.57 per share and reported revenue grew 18% to $34.5 billion.”
Bearish Take AJ Fabino, a Nobias 5-star rated author, said, “As interest rates rise, banks may also experience an increase in defaults on loans — this is why most of them are increasing provisions for defaults and delinquencies.”
JPM Jan 2023
In mid-October, JPMorgan (JPM) shares hit 52-week lows of $101.28. Since then, shares have rallied roughly 33.3%, closing the trading session of Friday at $135.08. In recent weeks, a slew of large-cap U.S. banks have announced fourth quarter earnings, including JPMorgan. JPM beat Wall Street estimates on both the top and bottom lines when it announced its Q4 results on January 13th. However, since then, shares have fallen, trading down by 3.96% this week, alone.
As credible authors and analysts have analyzed the company’s quarterly data, positive and negative reports have come out. The majority of credible Wall Street analysts that cover JPM shares believe that the stock is likely to head lower. Yet, the average price target being applied to JPM shares by the credible analysts community implies slight upside potential. In short, JPMorgan remains a battle stock as credible individuals attempt to decipher whether or not the stock’s recent rally is likely to continue.
Bullish Nobias Credible Analysts Opinions:
In early January, Nobias 5-star rated author, Gen Alpha, highlighted J.P. Morgan in a bullish report that was published on Seeking Alpha. They wrote, “JPMorgan Chase is one of the largest and most influential financial institutions, with a history dating back over two centuries. The company is a global leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, and asset management.”
Gen Alpha continued, “What differentiates JPM from the likes of Goldman Sachs (GS) and Morgan Stanley (MS) is its multi-cylinder business approach that's not overly reliant on deal-making, transactions, and IPOs. This has worked out well for JPM, especially over the last year, as M&A and IPO activity has substantially declined due primarily to higher interest rates and economic uncertainty.”
Regarding the company’s quality metrics, they stated, “Importantly, JPM maintains an A- credit rating from S&P and carries a common equity tier 1 ratio of 12.5% as of the last reported quarter, up 30 basis points sequentially. This sits well above the 4.5% requirement by the Federal Reserve for large banks. It's worth noting that management is targeting an even stronger CET1 ratio of 13% for the first quarter of 2023.”
Regarding shareholder returns, Gen Alpha wrote, “The strong operating fundamentals and balance sheet lends support to JPM's 3% dividend yield, which is well-supported by a 34% payout ratio. The dividend also comes with 8 years of consecutive annual growth and an impressive 5-year CAGR of 14.4%.”
Lastly, they concluded, “With a well-covered dividend yield, track record of growth, and low valuation, JPM could give investors potentially strong long-term returns from present levels.” Shares of JPM are essentially flat since this report was published; however, since then, the company has posted its Q4 earnings results.
Coming into the quarter, Nobias 4-star rated author, Mircea Vasiu, touched upon Wall Street’s consensus estimates for the JPM’s Q4 results. Vasiu wrote, “JPMorgan Chase reports its quarterly earnings on Friday, January 13, during pre-market hours. The market expects EPS of $3.12, and the annual revenue estimate for the fiscal period ending December 2023 is $140.36 billion.”
Bearish Nobias Credible Analysts Opinions:
Harrison Miller, a Nobias 4-star rated author, highlighted JPM’s Q4 results in an article that he published at Investors.com shortly after the results went public. Looking at JPMorgan’s top and bottom-line results, Miller said, “JPMorgan earnings rose 7% to $3.57 per share and reported revenue grew 18% to $34.5 billion.” He continued, “Net interest income spiked 48% to $20.3 billion, exceeding forecasts of 39% growth to $19.1 billion and marking the fifth straight quarterly gain. Consumer banking revenue increased 29% to $15.8 billion and just beat estimates of $15.6 billion. Meanwhile, JPMorgan's consumer and investment banking revenue dipped 9% to $10.5 billion, coming in lower than the expected $10.8 billion.”
AJ Fabino, a Nobias 5-star rated author, also covered JPMorgan’s Q4 results in an article published at Benzinga this week. Fabino put a spotlight on management’s macro economic outlook, writing, “During a call with reporters, Dimon said, “It may be a mild recession. It may not be,” according to the Wall Street Journal.”
And with that in mind, he continued, “It’s important to understand the ambivalent relationship between the Fed’s interest rates, and its effects on banks.” Fabino wrote, “When the Fed raises interest rates, banks are able to charge higher interest rates on loans, which can lead to higher revenue for the bank.”
“Additionally,” he said, “banks often invest a portion of their assets in Treasury bonds and other fixed-income securities.” As interest rates rise, the value of these investments increases, which can also contribute to an increase in bank profits."
But, there are potential risks in play as rates rise as well. Fabino said, “As interest rates rise, banks may also experience an increase in defaults on loans — this is why most of them are increasing provisions for defaults and delinquencies.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Thankfully, he notes, this slowdown isn’t appearing in the company’s reported data. Fabino noted, “JPMorgan said Friday that spending on credit cards rose 12% from a year ago and loans on cards were up 20%. It also said total loans rose 5% as big- and medium-size businesses borrowed more.”
Overall bias of Nobias Credible Analysts and Bloggers:
Despite JPMorgan’s sell-off this week, the majority of credible authors that the Nobias algorithm tracks offer tepid sentiment for shares. 55% of recent articles published on JPM have expressed a “neutral” sentiment. The credible Wall Street analysts that the Nobias algorithm tracks have expressed similar opinions.
4 out of the 7 credible analysts that Nobias tracks who have published reports on JPM believe that shares are likely to continue to decrease in value from here.
Yet, the average price target being applied to JPM shares by this group of credible analysts implies a slight upside. Currently, JPM shares trade for $135.08. The average price target that the credible analyst community has attached to JPMorgan is $139.57, which implies upside potential of approximately 3.3%. Therefore, although there are more credible bears than bulls on Wall Street, the bulls’ high fair value estimates outweigh the more prevalent negative sentiment expressed by the bears. All in all, it appears that both authors and analysts believe that JPMorgan’s recent 33.3% rally off of its recent lows was justified. However, they doubt significant near-term upside from here.
Disclosure: Nicholas Ward has no JPM position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.