JPMorgan Chase Stock: What Can Investors Expect?

On Tuesday, KBW (Keefe Bruyette & Woods) downgraded JPMorgan Chase (JPM) stock to “market perform” from “outperform.” However, KBW increased the target price to $135 from $128. The firm sees limited upside in the stock. KBW has a conservative outlook due to JPMorgan Chase’s valuation.

What to expect from JPMorgan stock

So far, JPMorgan Chase stock has recorded substantial gains this year. The stock has outperformed the broader markets. However, KBW doesn’t expect the performance to recur in 2020.

Analysts’ estimate indicates that JPMorgan Chase’s revenue and earnings growth could soften in 2020. The consensus estimate suggests weakness in the company’s revenues in the first three quarters of 2020. Meanwhile, analysts expect JPMorgan Chase’s top line to return to growth in the fourth quarter of 2020.

The lower interest rate environment will likely take a toll on the NII (net interest income). Deposit margin compression and tough YoY (year-over-year) comparisons could weigh on JPMorgan Chase’s bottom-line growth.

Analysts’ consensus estimate suggests a steep sequential slowdown in JPMorgan Chase’s bottom-line growth. Analysts expect the company to mark low-single-digit growth in its EPS in 2020 compared to double-digit growth in 2019.

JPMorgan upgrades Q4 outlook

In a separate development, JPMorgan Chase updated the fourth-quarter outlook. The company expects its IB fees to stay flat in the fourth quarter. Previously, the bank guided for a YoY decline. Speaking at Goldman Sachs U.S. Financial Services Conference, JPMorgan Chase’s CFO, Jennifer Piepszak, said that the quarter is turning out slightly better than what management expected.

JPMorgan Chase expects its NII to improve in the fourth quarter.

During the third-quarter conference call, JPMorgan Chase said that the NII would be lower than its previous outlook of $57.5 billion in 2019. Earlier, the bank cut its NII outlook to $57.5 billion from $58.0 billion.

JPMorgan’s stock performance

So far, JPMorgan Chase stock has risen about 38% this year. The stock is beating the broader markets by a wide margin. The bank’s strong financial performance this year supported the uptrend in its stock. However, the Fed’s dovish stance and tough comparisons pose challenges.

In comparison, Citigroup (C), Bank of America (BAC), and Goldman Sachs (GS) shares have risen 45.6%, 36.1%, and 32.8%, respectively, YTD.

However, Wells Fargo (WFC) shares are lagging its peers. So far, the shares have risen about 16.5% this year. Lower short-term interest rates will likely hurt Wells Fargo’s NII and profitability.

Notably, 11 analysts had a “buy” rating on JPMorgan Chase stock in November. Currently, the number has declined to nine analysts.

Analysts have an average target price of $124.38 on JPMorgan Chase stock, which implies a downside of 7.5% based on its closing price of $134.50 on Tuesday.