J P Morgan Chase & Co (JPM) Buy or Sell Stock Guide

February 13, 2020

Are you looking for the analysis of J P Morgan Chase & Co (JPM) stock? Are you wondering what the bulls and the bears say about it?

If so, you came to the right place. In this stock guide, we will share with you 9 reasons to buy and 12 reasons to sell JPM stock. You’ll get a perspective on what the bulls and the bears say about it.

The analysis below may be also helpful to you if you have any of the following questions about JPM stock:

  • Is JPM a buy or a sell?
  • Should I sell or hold JPM stock today?
  • Is JPM a good buy / investment?
  • What are JPM analyst opinions, recommendations and ratings?

Let’s start with the bull case. Here are the reasons to buy JPM stock:

1. JPMorgan has achieved a reasonable level of profitability despite a number of headwinds. Earnings could improve substantially once the firm is firing on all cylinders, especially in an environment of higher interest rates.

2. JPMorgan did a remarkable job of limiting its credit losses during the financial crisis.

3. Scale is becoming more important as regulatory and technological costs rise, improving JPMorgan Chase's competitive position.

4. Over the past several years, JPMorgan’s net interest income (NII) and net interest margin (NIM) had been under pressure amid a low interest rate environment. However, with the improvement in the interest rates scenario following the interest rate hikes and steady loan growth, strain on NII and NIM continue to ease. Over the last three years (2015-2017), NII has witnessed a CAGR of 7.3%.

5. Additionally, in order to overcome the challenging industry backdrop and comply with regulations, JPMorgan has been streamlining its businesses and focusing on core operations. The company continues to consolidate its branch network with an increased focus on digitization and by trimming workforce in its less profitable businesses. All these resulted in cost savings.

6. Further, JPMorgan remains focused on acquiring the industry's best deposit franchise and enhancing its loan portfolio. Despite the overall challenging market environment, total deposits and loan balances continued to grow over the past several years. As of December 31, 2017, loans-to-deposits ratio was 64%. Loan and deposit growth is expected to continue in the quarters ahead.

7. We remain encouraged by JPMorgan’s capital deployment activities. The company’s 2017 capital plan (approved by the Federal Reserve) includes a 12% dividend hike and $19.4 billion share repurchase authorization. Given its solid liquidity position and earnings strength, the company should be able to sustain improved capital deployments.

8. JPM quarterly revenue growth was 10.30%, higher than the industry and sector average revenue growth (2.02% and 3.47%, respectively). See JPM revenue growth chart.

9. JPM forward dividend yield is 2.65%, higher than the industry (0.71%) and sector (0.75%) forward dividend yields. See JPM forward dividend chart.

Now that you understand the bull case, let’s look at the reasons to sell JPM stock (i.e., the bear case):

1. As a systemically important firm, JPMorgan is likely to remain under the regulatory microscope for years to come. Regulatory relief will help smaller banks at the expense of "too big to fail" institutions.

2. It's difficult to quantify potential exposures (let alone losses) created by the firm's trading activities, as evidenced by the London Whale incident.

3. Future CEOs may not be as talented as Jamie Dimon, who is one of few managers to achieve any measure of success at the helm of a systemically important institution.

4. JPMorgan’s non-interest income is expected to remain subdued in the upcoming quarters primarily due to the global equity market turmoil and other macro-economic factors. Notably, the same has been steadily declining at a four-year CAGR (2014- 2017) of 1.3%. Dismal performance of capital markets and slowdown in mortgage banking continue to put pressure on fee income.

5. Though JPMorgan has resolved quite a many litigation issues, it still faces investigations from several federal agencies and a few foreign governments for its business conducts in the pre-crisis period. Legal expenses are expected to continue weighing marginally on the company’s bottom line in the near future.

6. JPMorgan’s trailing 12-month return on equity (ROE) undercuts its growth potential. Also, the company’s ROE of 11.63% gradually deteriorated over last few years. In addition, it compares unfavorably with ROE of 16.01% for the S&P 500, reflecting the fact that it is less efficient in using shareholders’ funds.

7. JPM stock price ($138.00) is close to the 52-week high ($141.09). Perhaps now is a good time to sell? See JPM price chart.

8. JPM profitability is declining. The YoY profit margin change was -1.08 percentage points. See JPM profitability chart.

9. JPM forward P/E ratio is 11.46, and it’s high compared to its industry peers’ P/E ratios. See JPM forward P/E ratio chart.

10. JPM Price/Book ratio is 1.77, and it’s high compared to its industry peers’ P/B ratios. See JPM forward Price/Book ratio chart.

11. JPM Price/Sales ratio is 3.71, and it’s high compared to its industry peers’ P/S ratios. See JPM forward Price/Sales ratio chart.

12. JPM average analyst price target ($132.00) is below its current price ($138.00). See JPM price target chart.

Now let's look at the key statistics for JPM:

Metrics JPM
Price $135.83
Average Price Target / Upside $132.00 / -2.82%
Average Analyst Rating Hold
Forward Dividend Yield 2.61%
Industry Banks - Global
Sector Financial Services
Number of Employees 256,105
Market Cap $423.93B
Forward P/E Ratio 11.90
Price/Book Ratio 3.85
Revenue (TTM) $110.04B
YoY Quarterly Revenue Growth 10.30%
Profit Margin 33.11%

What are your thoughts on JPM?

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