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JPMorgan (JPM) Stock Hits 2-Year High: Wait for the Dip or Buy Now?
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Shares of JPMorgan (JPM - Free Report) , the largest American lender, have been performing remarkably well this year. The stock touched its two-year high of $219.19 during the last trading session and finally closed at $218.31, soaring 28.3% year to date.
The JPM stock has handily outperformed the industry, the S&P 500 Index and its close peers – Bank of America (BAC - Free Report) , Citigroup (C - Free Report) and Wells Fargo (WFC - Free Report) – in 2024.
The recent jump in the shares of JPMorgan can be attributed to the statement by the Federal Reserve chairman, Jerome Powell, at the Kansas City Fed's annual economic symposium in Jackson Hole on Aug 23. He said, “The time has come for policy to adjust.”
With the series of economic data suggesting interest rate cuts are imminent, the clear signal from the Fed leadership had the stock markets soaring. The S&P 500 index rallied 1.2%, and the KBW Nasdaq Bank Index was up 2.4% on Friday.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
While the timing and pace of rate cuts will "depend on incoming data," market participants were quick to signal four rate cuts of 25 basis points each by 2024-end. Powell stated that the central bank has "ample room" to maneuver as monetary policy enters its next phase without a high recession risk.
Such positive indicators reinforced investors' confidence in the banking sector and contributed to JPMorgan’s stock touching a two-year high. Unlike other banks, the company wasn’t much impacted by the current high-interest rate regime even though its deposit costs surged in the past two years. The company currently projects net interest income (NII) in 2024 to be almost $91 billion, up nearly 2% year over year.
On the other hand, at present, BAC, C and WFC project their NII to decline this year from the 2023 level.
With the interest rate cuts beginning in September, we can expect an upward revision in the JPM’s NII target for this year. Daniel Pinto, president and chief operating officer of the company, will present at the Barclays Global Financial Services Conference on Sep 10, 2024, where he might provide an updated outlook.
Additionally, 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.
Assessing JPM’s Investment Potential
JPMorgan is a banking behemoth, well-poised to leverage its position to bolster its financials. In sync with this, earlier this year, 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.
The company launched its digital retail bank Chase in the U.K. in 2021 and plans to expand the reach of its digital bank across the European Union countries soon. JPMorgan is also focused on bolstering its investment banking and asset management businesses in China.
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.
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.
Does the JPM Stock Have More Room to Run?
Given the recent rally in JPM shares, it is currently trading at a premium with forward 12-month earnings multiple of 12.97X compared with the industry’s 11.65X, indicating a stretched valuation.
Price-to-Earnings F12M
Image Source: Zacks Investment Research
Analysts seem to be bullish about JPMorgan’s prospects. Over the past two months, the Zacks Consensus Estimate for 2024 and 2025 earnings has moved upward. This upward adjustment reflects a positive sentiment among analysts and suggests encouraging prospects.
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.
Hence, given the company’s strong fundamentals and positive estimate revisions, investors should consider parking their cash in JPMorgan at its current price levels for solid long-term returns despite premium valuation.
Image: Bigstock
JPMorgan (JPM) Stock Hits 2-Year High: Wait for the Dip or Buy Now?
Shares of JPMorgan (JPM - Free Report) , the largest American lender, have been performing remarkably well this year. The stock touched its two-year high of $219.19 during the last trading session and finally closed at $218.31, soaring 28.3% year to date.
The JPM stock has handily outperformed the industry, the S&P 500 Index and its close peers – Bank of America (BAC - Free Report) , Citigroup (C - Free Report) and Wells Fargo (WFC - Free Report) – in 2024.
The recent jump in the shares of JPMorgan can be attributed to the statement by the Federal Reserve chairman, Jerome Powell, at the Kansas City Fed's annual economic symposium in Jackson Hole on Aug 23. He said, “The time has come for policy to adjust.”
With the series of economic data suggesting interest rate cuts are imminent, the clear signal from the Fed leadership had the stock markets soaring. The S&P 500 index rallied 1.2%, and the KBW Nasdaq Bank Index was up 2.4% on Friday.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
While the timing and pace of rate cuts will "depend on incoming data," market participants were quick to signal four rate cuts of 25 basis points each by 2024-end. Powell stated that the central bank has "ample room" to maneuver as monetary policy enters its next phase without a high recession risk.
Such positive indicators reinforced investors' confidence in the banking sector and contributed to JPMorgan’s stock touching a two-year high. Unlike other banks, the company wasn’t much impacted by the current high-interest rate regime even though its deposit costs surged in the past two years. The company currently projects net interest income (NII) in 2024 to be almost $91 billion, up nearly 2% year over year.
On the other hand, at present, BAC, C and WFC project their NII to decline this year from the 2023 level.
With the interest rate cuts beginning in September, we can expect an upward revision in the JPM’s NII target for this year. Daniel Pinto, president and chief operating officer of the company, will present at the Barclays Global Financial Services Conference on Sep 10, 2024, where he might provide an updated outlook.
Additionally, 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.
Assessing JPM’s Investment Potential
JPMorgan is a banking behemoth, well-poised to leverage its position to bolster its financials. In sync with this, earlier this year, 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.
The company launched its digital retail bank Chase in the U.K. in 2021 and plans to expand the reach of its digital bank across the European Union countries soon. JPMorgan is also focused on bolstering its investment banking and asset management businesses in China.
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.
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.
Does the JPM Stock Have More Room to Run?
Given the recent rally in JPM shares, it is currently trading at a premium with forward 12-month earnings multiple of 12.97X compared with the industry’s 11.65X, indicating a stretched valuation.
Price-to-Earnings F12M
Image Source: Zacks Investment Research
Analysts seem to be bullish about JPMorgan’s prospects. Over the past two months, the Zacks Consensus Estimate for 2024 and 2025 earnings has moved upward. This upward adjustment reflects a positive sentiment among analysts and suggests encouraging prospects.
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.
Hence, given the company’s strong fundamentals and positive estimate revisions, investors should consider parking their cash in JPMorgan at its current price levels for solid long-term returns despite premium valuation.
JPM currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.