November 9, 2023, $144.29
Business Overview:
- JPMorgan Chase & Co. is a financial holding company providing comprehensive financial and investment banking services across various segments. These include Consumer and Community Banking, Corporate and Investment Bank, Commercial Banking, and Asset and Wealth Management. It serves a diverse client base, offering a range of services such as investment banking, market-making, prime brokerage, treasury and securities products, and asset and wealth management. Established in 1968, the company is headquartered in New York, NY.
Maverick Guidance:
- Short-term technical buy/sell recommendation: BUY
- Long-term portfolio recommendation: BUY
- The major banks enjoyed many years of high profitability when interest rates were low during the Fed Quantitative Easing period. Rates today are high and will be “higher for longer,” according to the Fed. So, while JPM is expected to enjoy many good years of profitability, the bank will experience headwinds in the years ahead.
- With the Fed’s present Quantitative Tightening policy, the banks have not been active corporate lenders in 2023.
Consideration for Maverick Portfolio:
- Appropriate for risk profile score of 16-21. The Moderately Conservative Investor aims for a balanced approach that combines growth and stability. The Maverick CAUTIOUS GROWTH portfolio is designed to achieve modest medium-term total returns.
- Appropriate for risk profile score of 22-29. The Moderate Investor seeks to balance caution and ambition, aiming for reasonable growth while managing risk. The Maverick MODERATE GROWTH portfolio is designed to maintain a stable yet potentially rewarding financial strategy by including a mix of conservative and moderately aggressive Dow 30 stocks.
- Appropriate for risk profile score of 30-35. The Moderately Aggressive Investor is willing to take on higher risk for the potential of higher returns. The Maverick DYNAMIC GROWTH portfolio includes a higher allocation of high-growth-oriented Dow 30 stocks to align with this risk-tolerant approach.
Market Guidance:
- Consensus Analyst Ratings— MarketBeat = Moderate Buy, TipRanks = Moderate Buy
- 18 Wall Street analysts have offered 12-month price targets in the last 3 months. There are 12 Buy, 6 Hold, and zero Sell. (from TipRanks)
- Based on 18 Wall Street analysts offering 12-month price targets in the last 3 months, the average price target is $172.72, with a high forecast of $233.00 and a low forecast of $140.00. The average price target represents a 19.7% change from the last price of $144.29. (from TipRanks)
- Dividend Yield: $1.05 per share paid quarterly to yield 2.81%.
- Dividend growth for over 15 years. (from TipRanks)
- Technical Sentiment (based on Technical Indicators and Moving Averages):
- Investing.com = Daily (STRONG BUY) and Weekly (NEUTRAL)
- TipRanks = Daily (BUY) and Weekly (BUY)
Value Line Guidance:
- Company Financial Strength Rating: A+
- Share Price Safety, Market Timing, Technical Rank: 1=best. 5=worst
- Share Price Safety: 2 of 5
- Market Timing: 2 of 5
- Technical Rank: 3 of 5
- Beta: 15
- Stock’s Price Stability: 80/100
- Price Growth Persistence: 75/100
- Earnings Predictability: 65/100
- Projected Average Annual PE: 9
- Average Annual Loans Growth in the past 5 years: +7.5%
- Average Annual Loans Growth for the next 5 years: +9.0%
- Average Annual Earnings Growth in the past 5 years: +14.0%
- Average Annual Earnings Growth for the next 5 years: +8.5%
- Average Annual Dividend Growth in the past 5 years: +15.0%
- Average Annual Dividend Growth next 5 years: +6.5%
- Projected Average Annual Dividend Yield in 3 to 5 years: +3.1%
Financial Performance
- 10-year Average Annual Total Return: +13.47% (through Nov 8, 2023)
- EPS
- 2020: $8.88
- 2021: $15.36
- 2022: $12.09
- 2023: e$16.50
- 2024: e$16.75 (from Value Line Quarterly Report)
- Current PE: 60 (FinViz)
- Forward PE: 9.37 (FinViz)
- PEG Ratio: ?? (FinViz)
- Beta: 10 (FinViz)
Quarterly Reports Summaries (including Revenue, Cash Flow, Earnings):
3Q2023 (September)
- JP Morgan Chase had a strong performance in 2023, with Q2 profits of $3.84 per share, a nearly 40% increase YoY, excluding a $0.91-per-share gain related to the First Republic Bank acquisition.
- Higher interest rates significantly impacted results, although lower deposit balances partially offset these gains. The provision for credit losses increased to $2.9 billion, up from $1.1 billion in 2022, or $1.7 billion when excluding the First Republic impact.
- A first-quarter US regional banking crisis occurred in 2023, with several small- to mid-size banks failing over five days in March. Large banks like JP Morgan Chase benefited as assets moved to systemically important institutions due to banking legislation.
- JP Morgan Chase maintains a full-year earnings target of $15.80 per share for 2023, reflecting a 30% rebound from the previous year’s figure of $12.09. Expectations for 2024 include projected net share growth of 3% to $16.30.
- The acquisition of First Republic Bank on May 1 added significant assets and enhanced JP Morgan Chase’s ‘wealth strategy’ by increasing its penetration among high-net-worth clients.
- The bank holds a favorable ranking for Timeliness. It offers a decent dividend yield, solid financials, and approximately $3.7 trillion in assets, positioning it for growth through investments in digital technology, partnerships, and potential acquisitions.
- Despite stock fluctuations, JP Morgan Chase has rebounded after a drop in March and holds a Timeliness rank of 1 (Highest), making its dividend yield attractive.
2Q2023 (June)
JPMorgan’s performance in 2023 has been strong, with second-quarter profits of $3.84 per share, a nearly 40% increase from the previous year, excluding a $0.91-per-share gain due to the acquisition of First Republic Bank.
Higher interest rates have contributed to JPMorgan’s positive results, though lower deposit balances partially offset the gains.
The provision for credit losses in the second quarter was $2.9 billion, compared to $1.1 billion in 2022. Excluding the impact of First Republic, the provision would have been $1.7 billion, a 55% increase driven by higher net charge-offs in the card services segment.
Despite ongoing global economic uncertainty due to factors like inflation and the war in Ukraine, the full-year earnings target for 2023 is $15.80 per share, representing a 30% increase from 2022.
Looking ahead to 2024, JPMorgan expects slower growth, with the share net increasing at a 3% rate to reach $16.30 per share.
JPMorgan acquired First Republic Bank’s assets, including $173 billion in loans, $30 billion in securities, and $92 billion in deposits, with a significant portion of the deposits coming from other U.S. banks.
The acquisition of First Republic enhances JPMorgan’s presence among U.S. high-net-worth clients and aligns with its ‘wealth strategy.’
JPMorgan is favorably ranked for Timeliness and offers a decent dividend yield, making it an attractive investment option.
1Q2023 (March)
- In the first quarter of 2023, JPMorgan Chase reported earnings of $4.10 per share, a significant 56% increase from the previous year’s total of $2.63.
- This strong performance was driven by a nearly 50% surge in net interest income due to higher interest rates, although lower deposit balances had a partial offsetting effect.
- The provision for credit losses increased by approximately 56%, reflecting the bank’s cautious economic outlook.
- Full-year earnings per share are expected to be around $15.70, representing a 30% increase from 2022.
- Looking ahead to the next year, earnings per share are projected to reach $15.50 if business conditions remain favorable.
- JPMorgan and other leading U.S. financial institutions made uninsured deposits totaling $30 billion into troubled First Republic Bank, with JPMorgan’s contribution being $5 billion.
- Business prospects for 2026-2028 are promising for JPMorgan, aided by its status as the country’s largest bank, total assets of approximately $3.7 trillion, the deployment of digital technology to strengthen client relationships, partnership agreements, and sound corporate finances.
- The stock’s price has experienced fluctuations but rebounded, supported by the bank’s strong first-quarter performance, and it holds the highest Timeliness rank of 1. The dividend yield is also favorable.
4Q2022 (December 2022)
- In 2022, JPMorgan Chase reported fourth-quarter profits of $3.57 per share, marking a 7% increase compared to the prior year’s figure of $3.33.
- This improvement was attributed to the Consumer & Community Banking division, benefiting from Banking & Wealth Management and Card Services & Auto segments and the Commercial Banking operation with higher revenues driven by increased deposit margins.
- However, despite the positive fourth quarter, full-year earnings per share for 2022 amounted to $12.09, reflecting a 21% decrease from the exceptional $15.36 total in 2021.
- The bank faces some uncertainty in the new year, including the possibility of an economic recession. Still, its diversification and the impact of rising interest rates provide some optimism for an 8% earnings increase to $13.00 per share.
- Corporate finances are in good shape, with substantial cash and deposits, manageable long-term debt, and strong capitalization.
- The stock has shown strength, likely influenced by the improved fourth-quarter profits, and it holds favorable rankings for both Timeliness and Safety. The dividend yield is also attractive.
The 3-to-5-year Operational and Financial Outlook:
- The 3-to-5-year outlook indicates substantial headwinds.
- Capital appreciation potential in the 2025-2027 timeframe is expected to be unimpressive, or At least clearly not as was the case in the past ten years when interest rates were low during the Fed Quantitative Easing period.
Company SWOT Analysis
Internal Strategic Factors:
Strengths
- Renowned Brand: JP Morgan is a well-known and respected brand, ranking 24th on the Fortune 500 list. Its long history and recognition contribute to a strong customer base.
- Global Presence: Operating in more than 60 countries, JP Morgan has a significant global presence, which helps expand its customer base and generate higher revenue.
- Strong Financial Position: Ranked as the 5th largest bank in the world by assets, with assets worth $3.7 billion in 2021, JP Morgan’s robust financial position allows for smooth operations and attracts other businesses to collaborate.
- Excellent Services: The bank offers a wide range of services, including banking, credit cards, asset management, mutual funds, loans, and expertise in consumer banking, investment banking, commercial banking, and asset management.
- Market Stronghold: JP Morgan holds a strong position in the market with a good reputation, a well-established brand name, and a solid financial foundation, facilitating business expansion.
- Wide Existence: Operating in over 100 countries with a large workforce of over 200,000 employees provides stability and strength to the company.
- CSR Activities: The company is committed to Corporate Social Responsibility (CSR) initiatives, investing significantly in global charity and business ventures to make a positive impact.
Weaknesses
- High Operational Cost: JP Morgan’s extensive global operations, with over 60 countries, lead to high operational costs. A significant portion of expenses is allocated to employee salaries, as the bank employs over 271,000 people.
- High Reliance on North America: While JP Morgan operates worldwide, it heavily relies on North America for revenue generation, with this region responsible for 53% of the bank’s total revenue.
- Controversies: The bank has been involved in various controversies and lawsuits, which can negatively impact its reputation and customer base. Recent examples include fines for employee use of non-compliant platforms and accusations of gender discrimination.
- Stiff Competition: Intense competition from other financial service providers has limited market share growth.
- Limited Success in Diversification: Despite its global presence, JP Morgan has had limited success in diversifying beyond its core markets.
- Management Issues: Past incidents of regulatory penalties, such as the UK FSA’s fine, raise concerns about management and compliance.
- Technical Failures: Technical issues, like the online banking system security flaw in 2018, can affect customer trust and satisfaction.
External Strategic Factors:
Opportunities
- Increase International Presence: Expanding operations to more countries can help generate additional revenue and grow the customer base.
- Reduce Reliance on North America: Diversifying revenue sources beyond North America, focusing on regions like Europe and the Middle East.
- Growth in the Global Credit Card Market: Capitalizing on the expanding credit card market, which is growing at a rate of 2.9%, by offering diverse financial and credit services.
- Expansion of Services: Diversifying services in various countries allows JP Morgan to capture more market share and enhance financial stability.
- New Services for Mass Customers: Offering new services and diversifying the portfolio to attract a broader customer base.
- Global Investments: Investing in projects worldwide to diversify revenue sources.
- Commercial Banking, Acquisitions, and Joint Ventures: Exploring opportunities in commercial banking, acquisitions, and joint ventures to expand the business globally.
Threats
- Global Recession: Anticipated global recession due to post-pandemic issues and geopolitical conflicts can lead to a decline in customers’ living standards, withdrawals from the bank, and reduced demand for financial services.
- Regulatory Changes: Evolving and increasingly stringent regulatory requirements can increase compliance costs and limit operational freedom.
- Tough Competition: Intense competition in the saturated US banking industry, with numerous competitors, including major banks like Bank of America, Citigroup, and Wells Fargo, requires constant innovation to maintain market presence.
- Mortgage Market Instability: An unstable mortgage market poses the risk of financial losses.
- Presence of Global Competitors: The presence of other leading global banks and financial institutions can impact JP Morgan’s business.
- Changing Government Policies: Frequent changes in government policies can affect the company’s operations.
- New Competitors: Emerging companies entering the market create additional competition for JP Morgan.
- Financial Crises: Potential financial crises necessitate thorough financial assessments and provisions to mitigate future uncertainties.
FinViz Snapshot: https://finviz.com/screener.ashx?v=171&t=JPM
10-Year Historical Price Chart:
https://tvc-invdn-com.investing.com/data/tvc_74ec3a35e37fc3db3a3a90a288a8980a.png
Point & Figure Chart:
https://stockcharts.com/freecharts/pnf.php?c=jpm,P
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