Why Wall Street Still Loves JPMorgan Stock

Analysts’ recommendations

Analysts are bullish about JPMorgan Chase (JPM) and foresee decent growth in its stock price from its current level.

Strong economic growth, a healthy job market, tax cuts, and easing regulations are creating a pleasant business environment for JPMorgan Chase. The US GDP grew 4.1% in the second quarter.

Why Wall Street Still Loves JPMorgan Stock

As of September 18, of the 29 analysts covering JPM, 16 have given it “strong buys” or “buys,” 12 have given it “holds,” and one has given it a “sell.” Analysts’ one-year forward price target for the stock is $122.33, a potential upside of 7.7% from its current price level of $113.84.

What’s driving the optimism?

JPMorgan’s fantastic record of positive earnings surprises has fortified analysts’ confidence in its stock. In the last 13 quarters, the bank has surpassed analysts’ estimates 12 times with an average positive surprise of 8.3%.

Moreover, the Federal Reserve’s hawkish monetary policy should continue to support JPMorgan’s bottom line results. Since the inception of the Federal Reserve in the early 20th century, it has been common for banks’ net interest margins to expand in rising interest rate scenarios.

The Fed raised the interest rate twice in the first half of 2018, and it intends to enact two more increases in the second half and three increases next year. In its latest earnings results for the second quarter, which it reported on July 13, JPMorgan’s net interest margin expanded 15 basis points year-over-year to 2.46%.

JPMorgan also cleared the Fed’s Dodd-Frank stress test, underscoring its financial strength. In late June, the Fed announced that JPMorgan was among the 34 major US banks that had passed the test, which checks a bank’s ability to endure a major economic crisis.

Peers’ ratings and target prices

Wall Street seems to be bullish about the entire banking industry (XLF), as analysts have provided “buy” recommendations on the majority of JPMorgan’s competitors. The one-year target prices of its peers Bank of America (BAC), Morgan Stanley (MS), and Citigroup (C) signify potential upsides of 14.2%, 25.3%, and 17.8%, respectively, from their current market prices.