We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
JPMorgan (JPM) Stock Near 52-Week High: Right Time to Buy?
Read MoreHide Full Article
Shares of JPMorgan (JPM - Free Report) , the largest American lender, have been performing remarkably well of late. Currently, the stock is trading just 1% off its 52-week high of $217.56 hit on Jul 17, a few days after it announced second-quarter 2024 results.
So far this year, the JPM stock has surged 26.6%, handily outperforming the industry, the S&P 500 Index and its close peer – Bank of America (BAC - Free Report) .
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Technical indicators suggest continued strength for JPM. The stock is trading above its 50-day and 200-day moving averages, signaling robust upward momentum and price stability. This underscores positive market sentiments and confidence in the company's financial health and prospects.
50-Day & 200-Day Moving Average
Image Source: Zacks Investment Research
The surge in JPMorgan stock has left many investors contemplating whether they've missed an investment opportunity or still have time to take a position. Before discussing that, let’s recap its second-quarter results.
Takeaways from JPM’s Q2 Results
Investment Banking (IB) Fees: In the second quarter, industry-wide IB business witnessed a solid trend reversal, and JPMorgan performed extremely well, continuing to lead on the global IB fees front. The company’s total IB fees were up 50% from the prior-year quarter to $2.37 billion. Specifically, equity underwriting fees jumped 56% and debt underwriting fees grew 51%. Also, advisory fees surged 45%. Management remains cautiously optimistic about the performance of the IB business going forward.
Markets Revenues: As trading volume rose during the second quarter, JPMorgan benefited from the same despite lower volatility. The company’s markets revenues grew 10% to $7.8 billion. Specifically, fixed-income markets revenues were up 5% to $4.8 billion, while equity trading numbers surged 21% to $3 billion. Though the trading business will likely normalize over time, the company is expected to keep performing well, driven by its scale and size.
Net Interest Income (NII): The current high interest rate regime is not conducive to a strong NII performance because of rising deposit/funding costs. Yet, JPM’s second-quarter NII numbers show a different picture. The metric grew 4% year over year to $22.75 billion. Further, management expects NII to rise almost 2% this year. On the other hand, its peers, including BAC and Citigroup (C - Free Report) , posted a decline in NII for the second quarter. Also, BAC and C project the metric to fall in 2024.
Asset Quality: As the 23-year high interest rates put pressure on consumer spending and macroeconomic factors put pressure on borrowers, JPMorgan reported a 5% rise in provision for credit losses for the second quarter to $3.05 billion. The company remains vigilant about the effects of continuous high rates and quantitative tightening on its loan portfolio.
Assessing JPM’s Potential
In the earnings release, JPMorgan CEO Jamie Dimon noted, “While market valuations and credit spreads seem to reflect a rather benign economic outlook, we continue to be vigilant about potential tail risks.” He, further, said, “Inflation and interest rates may stay higher than the market expects. And finally, we still do not know the full effects of quantitative tightening on this scale.”
Because of this cautious approach, the company continues to build huge reserves for potential loan losses as delinquencies rise. In the past two years, the company’s provision for credit losses has totaled $20.6 billion, while the loan growth has slowed. Given the expected economic downturn in the near term, JPM will likely keep increasing the provisions. This will put pressure on the company’s bottom-line growth.
Nonetheless, JPMorgan remains a banking behemoth and is well-poised to leverage this to bolster its financial performance. In sync with this, the company announced plans to expand its footprint by opening 500 branches by 2027. This will solidify its position as the bank with the largest branch network and a presence in all 48 states in the United States. In addition to enhancing market share, the strategy continues to help JPM grab cross-selling opportunities.
JPMorgan has been growing through on-bolt acquisitions, both domestic and international. Last year, the company increased its stake in Brazil's C6 Bank to 46% from 40%, formed a strategic alliance with Cleareye.ai (a financial technology firm focused on trade finance) and acquired Aumni and First Republic Bank (an FDIC-assisted deal). These and several others done in the past are expected to support the bank's plan to diversify revenues.
JPMorgan remains focused on acquiring the industry's best deposit franchise and strengthening its loan portfolio. Despite a challenging operating environment, deposits and loan balances have remained strong over the past several years. As of Jun 30, 2024, the loans-to-deposit ratio was 55%. Though a potential economic slowdown and high rates will hamper wholesale loan demand to some extent, demand for consumer loans (specifically credit cards) is expected to remain solid.
Besides these, the company is headed by one of the best in the industry, Jamie Dimon. Further, the top management shakeup (announced in January) resulted in the placement of potential successors to Dimon as heads of some important businesses.
Further, with the Federal Reserve expected to start cutting interest rates during the September FOMC meeting, JPMorgan will benefit from it. At present, interest rates are like a double-edged sword for the banks. While high rates have led to a jump in NII, they have raised funding and deposit costs, thus squeezing banks’ margins. As the central bank eases the monetary policy, all the banks, including JPM, Bank of America and Citigroup, are expected to gain from it.
Is the JPM Stock a Buy Now?
Given the rally in JPM shares this year, the company is currently trading at a premium with forward 12-month earnings multiple of 12.86X compared with the industry’s 11.77X, indicating a stretched valuation.
Price-to-Earnings F12M
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for JPM’s 2024 and 2025 earnings implies a 2.7% and 1% uptick, respectively, on a year-over-year basis. Encouragingly, JPM is also witnessing northbound estimate revisions for the current and the next year.
Estimate Revision Trend
Image Source: Zacks Investment Research
JPMorgan’s leadership position in several businesses and strategic plan to expand its footprint globally gives it an edge over its peers. Its focus on building a solid deposit franchise and bolstering its loan book positions it well for future growth.
JPMorgan also rewards its shareholders handsomely. The company intends to increase its quarterly dividend for the second time this year as it cleared the 2024 stress test. It also authorized a new share repurchase program. In the last five years, it increased dividends four times, with an annualized growth rate of 5.2%. Currently, the company's payout ratio stands at 27% of earnings.
Hence, given the company’s strong fundamentals and positive estimate revisions, we believe investors should consider parking their cash in JPMorgan at its current price levels for solid long-term returns.
Image: Bigstock
JPMorgan (JPM) Stock Near 52-Week High: Right Time to Buy?
Shares of JPMorgan (JPM - Free Report) , the largest American lender, have been performing remarkably well of late. Currently, the stock is trading just 1% off its 52-week high of $217.56 hit on Jul 17, a few days after it announced second-quarter 2024 results.
So far this year, the JPM stock has surged 26.6%, handily outperforming the industry, the S&P 500 Index and its close peer – Bank of America (BAC - Free Report) .
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Technical indicators suggest continued strength for JPM. The stock is trading above its 50-day and 200-day moving averages, signaling robust upward momentum and price stability. This underscores positive market sentiments and confidence in the company's financial health and prospects.
50-Day & 200-Day Moving Average
Image Source: Zacks Investment Research
The surge in JPMorgan stock has left many investors contemplating whether they've missed an investment opportunity or still have time to take a position. Before discussing that, let’s recap its second-quarter results.
Takeaways from JPM’s Q2 Results
Investment Banking (IB) Fees: In the second quarter, industry-wide IB business witnessed a solid trend reversal, and JPMorgan performed extremely well, continuing to lead on the global IB fees front. The company’s total IB fees were up 50% from the prior-year quarter to $2.37 billion. Specifically, equity underwriting fees jumped 56% and debt underwriting fees grew 51%. Also, advisory fees surged 45%. Management remains cautiously optimistic about the performance of the IB business going forward.
Markets Revenues: As trading volume rose during the second quarter, JPMorgan benefited from the same despite lower volatility. The company’s markets revenues grew 10% to $7.8 billion. Specifically, fixed-income markets revenues were up 5% to $4.8 billion, while equity trading numbers surged 21% to $3 billion. Though the trading business will likely normalize over time, the company is expected to keep performing well, driven by its scale and size.
Net Interest Income (NII): The current high interest rate regime is not conducive to a strong NII performance because of rising deposit/funding costs. Yet, JPM’s second-quarter NII numbers show a different picture. The metric grew 4% year over year to $22.75 billion. Further, management expects NII to rise almost 2% this year. On the other hand, its peers, including BAC and Citigroup (C - Free Report) , posted a decline in NII for the second quarter. Also, BAC and C project the metric to fall in 2024.
Asset Quality: As the 23-year high interest rates put pressure on consumer spending and macroeconomic factors put pressure on borrowers, JPMorgan reported a 5% rise in provision for credit losses for the second quarter to $3.05 billion. The company remains vigilant about the effects of continuous high rates and quantitative tightening on its loan portfolio.
Assessing JPM’s Potential
In the earnings release, JPMorgan CEO Jamie Dimon noted, “While market valuations and credit spreads seem to reflect a rather benign economic outlook, we continue to be vigilant about potential tail risks.” He, further, said, “Inflation and interest rates may stay higher than the market expects. And finally, we still do not know the full effects of quantitative tightening on this scale.”
Because of this cautious approach, the company continues to build huge reserves for potential loan losses as delinquencies rise. In the past two years, the company’s provision for credit losses has totaled $20.6 billion, while the loan growth has slowed. Given the expected economic downturn in the near term, JPM will likely keep increasing the provisions. This will put pressure on the company’s bottom-line growth.
Nonetheless, JPMorgan remains a banking behemoth and is well-poised to leverage this to bolster its financial performance. In sync with this, the company announced plans to expand its footprint by opening 500 branches by 2027. This will solidify its position as the bank with the largest branch network and a presence in all 48 states in the United States. In addition to enhancing market share, the strategy continues to help JPM grab cross-selling opportunities.
JPMorgan has been growing through on-bolt acquisitions, both domestic and international. Last year, the company increased its stake in Brazil's C6 Bank to 46% from 40%, formed a strategic alliance with Cleareye.ai (a financial technology firm focused on trade finance) and acquired Aumni and First Republic Bank (an FDIC-assisted deal). These and several others done in the past are expected to support the bank's plan to diversify revenues.
JPMorgan remains focused on acquiring the industry's best deposit franchise and strengthening its loan portfolio. Despite a challenging operating environment, deposits and loan balances have remained strong over the past several years. As of Jun 30, 2024, the loans-to-deposit ratio was 55%. Though a potential economic slowdown and high rates will hamper wholesale loan demand to some extent, demand for consumer loans (specifically credit cards) is expected to remain solid.
Besides these, the company is headed by one of the best in the industry, Jamie Dimon. Further, the top management shakeup (announced in January) resulted in the placement of potential successors to Dimon as heads of some important businesses.
Further, with the Federal Reserve expected to start cutting interest rates during the September FOMC meeting, JPMorgan will benefit from it. At present, interest rates are like a double-edged sword for the banks. While high rates have led to a jump in NII, they have raised funding and deposit costs, thus squeezing banks’ margins. As the central bank eases the monetary policy, all the banks, including JPM, Bank of America and Citigroup, are expected to gain from it.
Is the JPM Stock a Buy Now?
Given the rally in JPM shares this year, the company is currently trading at a premium with forward 12-month earnings multiple of 12.86X compared with the industry’s 11.77X, indicating a stretched valuation.
Price-to-Earnings F12M
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for JPM’s 2024 and 2025 earnings implies a 2.7% and 1% uptick, respectively, on a year-over-year basis. Encouragingly, JPM is also witnessing northbound estimate revisions for the current and the next year.
Estimate Revision Trend
Image Source: Zacks Investment Research
JPMorgan’s leadership position in several businesses and strategic plan to expand its footprint globally gives it an edge over its peers. Its focus on building a solid deposit franchise and bolstering its loan book positions it well for future growth.
JPMorgan also rewards its shareholders handsomely. The company intends to increase its quarterly dividend for the second time this year as it cleared the 2024 stress test. It also authorized a new share repurchase program. In the last five years, it increased dividends four times, with an annualized growth rate of 5.2%. Currently, the company's payout ratio stands at 27% of earnings.
Hence, given the company’s strong fundamentals and positive estimate revisions, we believe investors should consider parking their cash in JPMorgan at its current price levels for solid long-term returns.
JPM currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.