JPMorgan Stock Has Lagged Behind Peers. An Analyst Says Its Time to Buy. -- Barrons.com
JPMorgan Chase has had a tough year, with the stock underperforming the broader market. But the pullback could be an opportunity heading into earnings season, according to Citi.
Investors have been cautious on the U.S. banking sector, given that its high exposure to credit could put it at risk if the economy tumbles into a recession. But they've been especially careful about JPMorgan (ticker: JPM), which has posted two back-to-back disappointing quarters. The stock is down 28% this year, trailing its peers and coming in well below the S&P 500's 19% loss.
The selloff has made the stock attractive, wrote Citi analyst Keith Horowitz, who upgraded the shares to Buy from Neutral on Tuesday. JPMorgan is also a Barron's 2022 stock pick.
"Given the [year-to-date] pull back in the stock, we believe the market is no longer reflecting a premium valuation and we view this as an attractive entry point," he wrote in a Tuesday research note.
One of the big concerns for investors now is that the Federal Reserve's interest rate hikes could lead to higher credit losses as people default on their loans. A good way to combat this is to bet on banks that have strong balance sheets and management teams. JPMorgan "certainly fits that narrative," he wrote. The bank is well positioned to beat across some key categories when it reports second-quarter earnings on Thursday, he added.
Still, Horowitz trimmed his price target to $135 from $145, reflecting the recent results from the Fed's stress test. JPMorgan, Bank of America ( BAC), and Citigroup (C) all saw their stress capital buffers, or SCB, rise by 80 to 100 basis points. A higher SCB puts a damper on dividend and buyback expectations.
JPMorgan will be the first bank to report earnings this week, setting the tone for the rest of the U.S. big banks. Analysts surveyed by FactSet are expecting the bank to post earnings of $2.91 a share on $31.8 billion in revenue. The stock was up 1.7% to $114.75 on Tuesday.