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Why Did Baird Downgrade JPMorgan Chase?

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Nov. 14 2016, Updated 5:04 p.m. ET

Baird downgrades JPMorgan Chase

Baird analyst David George downgraded JPMorgan Chase (JPM) to a “neutral” from an “outperform” in a research note last week ahead of the US presidential election results. Baird held this view despite Donald Trump’s victory.

In a note to investors, Baird mentioned that the stock was trading at a fair value, and that it didn’t see significant upside potential.

“JPMorgan is a great company, but we think the stock is near fair value. We view JPMorgan as a core bank holding but would wait for a larger pullback before adding to positions. With relative valuation multiples (vs. banks and the S&P 500) near post-crisis highs, we think the risk/reward is now more balanced. We see better near-term upside in Wells Fargo, but caution that bank investor sentiment now seems broadly positive with stocks largely discounting a Fed rate hike in December and an improving macro outlook,” George said in a research note about the bank (BAC) (XLF) (WFC).

Further, George mentioned that JPMorgan could be affected by elevated political risk and has adapted to post-crisis regulatory changes without a significant impact on its returns.

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In a Reuters survey of 32 analysts, six assigned “strong buy” ratings to JPM, while 14 rated it as a “buy.” The stock received ten “hold” ratings and one “strong sell” and “sell” rating, respectively. JPMorgan has a 12-month target price of $73.25, a return potential of -4.5% from its last closing price.

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