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Here's Why JPMorgan (JPM) Stock is a Compelling Buy Right Now
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High interest rates, solid loan and deposit balances and the acquisition of First Republic Bank are expected to keep supporting JPMorgan’s (JPM - Free Report) financials. With green shoots visible in the investment banking (IB) business, IB fees are likely to witness a turnaround soon. Further, aided by solid earnings strength, the company will be able to sustain enhanced capital deployments.
The Zacks Consensus Estimate for JPMorgan's earnings has been revised 7.4% and 3.3% north for 2023 and 2024, respectively, over the past 30 days. This shows that analysts are optimistic regarding the company’s earnings prospects. JPM currently sports a Zacks Rank #1 (Strong Buy).
So far this year, shares of the company have rallied 15.1%, outperforming the industry's growth of 0.2% by a considerable margin.
Image Source: Zacks Investment Research
Why JPMorgan Stock is an Attractive Bet
Earnings Growth: JPMorgan witnessed earnings growth of 12.5% in the past three to five years, which is higher than the industry average of 6.1%. The uptrend is expected to continue in the near term. For 2023, we project the company’s earnings to grow 24.8%.
Also, its long-term (three-five years) expected earnings growth rate of 5% promises rewards for investors.
High Rates to Offer Support: With the Federal Reserve likely to keep interest rates high in the near term, JPMorgan’s net interest income (NII) and the net yield on interest-earning assets are expected to continue witnessing growth. Yet, rising funding and deposit costs are expected to weigh on NII and margins to some extent. The company projects NII to be roughly $87 billion this year (up from the prior guidance of $84 billion). We expect NII (reported) to jump 29.9% in 2023. The metric is expected to fall 10.9% next year and then rebound and grow 2.8% in 2025.
Strategic Acquisitions: JPM has been continuously expanding its operations in new regions by acquiring both domestic and international companies. In May, the company acquired Aumni and failed First Republic Bank. Last year, it announced a deal to buy Renovite, while it acquired a 49% stake in Greece-based Viva Wallet and Global Shares. These deals, along with several others, are expected to keep supporting the bank's plan to diversify revenues and expand the fee income product suite and consumer bank digitally.
Organic Footprint Expansion: In 2018, JPM announced plans to enter 25 new markets by opening 400 new branches. The company has made substantial progress on this front, with a presence in 48 of 50 U.S. states. In addition to enhancing market share, the strategy will help the bank grab cross-selling opportunities by increasing its presence in the card and auto loan sectors. Additionally, the company launched its digital retail bank Chase in the U.K. in 2021 and plans to further expand the reach of its digital bank across the European Union countries. JPMorgan is also focused on expanding the CIB and AWM businesses in China.
Green Shoots in IB Business: Global deal-making came to a grinding halt since last year on elevated inflation, higher rates, worsening macroeconomic outlook and volatility across the global financial markets. Hence, JPMorgan’s IB fees plunged 59% in 2022 and 12% in the first six of 2023. But now the company is seeing encouraging signs in the business, which is likely to rebound and grow at a decent pace once the macroeconomic and geopolitical ambiguity is over.
JPMorgan is likely to witness growth in IB fees driven by a healthy IB pipeline and active merger & acquisition market and leverage its top position to further gain from the changed scenario. While we expect IB fees to decline 13.9% in 2023, the same will rebound with 27.6% year-over-year growth in 2024.
Enhanced Capital Deployments: JPMorgan’s capital deployment activities seem impressive. Following the clearance of the 2023 stress test, the company intends to increase its dividend by 5% to $1.05 per share, which follows no change in dividend payout last year. Also, it plans to continue with its previously announced share repurchase program. It announced earlier that it intends to repurchase shares worth $12 billion this year. Driven by a strong capital position and earnings strength, the company is expected to sustain current capital deployments.
Superior Return on Equity (ROE): JPMorgan has an ROE of 17.29%, higher than the industry average of 13.26%. This shows that the company reinvests its cash more efficiently than its peers.
Other Banks Worth a Look
A couple of other top-ranked stocks from the banking space are PCB Bancorp (PCB - Free Report) and Popular, Inc. (BPOP - Free Report) .
PCB Bancorp currently carries a Zacks Rank #2 (Buy). Earnings estimates for 2023 have been revised 3.8% upward over the past 30 days. In the past three months, PCB’s shares have gained 18.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings estimates for Popular have been revised 10.5% north for 2023 over the past 30 days. Shares of BPOP have rallied 26.4% in the past three months. Currently, the company also carries a Zacks Rank #2.
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Here's Why JPMorgan (JPM) Stock is a Compelling Buy Right Now
High interest rates, solid loan and deposit balances and the acquisition of First Republic Bank are expected to keep supporting JPMorgan’s (JPM - Free Report) financials. With green shoots visible in the investment banking (IB) business, IB fees are likely to witness a turnaround soon. Further, aided by solid earnings strength, the company will be able to sustain enhanced capital deployments.
The Zacks Consensus Estimate for JPMorgan's earnings has been revised 7.4% and 3.3% north for 2023 and 2024, respectively, over the past 30 days. This shows that analysts are optimistic regarding the company’s earnings prospects. JPM currently sports a Zacks Rank #1 (Strong Buy).
So far this year, shares of the company have rallied 15.1%, outperforming the industry's growth of 0.2% by a considerable margin.
Image Source: Zacks Investment Research
Why JPMorgan Stock is an Attractive Bet
Earnings Growth: JPMorgan witnessed earnings growth of 12.5% in the past three to five years, which is higher than the industry average of 6.1%. The uptrend is expected to continue in the near term. For 2023, we project the company’s earnings to grow 24.8%.
Also, its long-term (three-five years) expected earnings growth rate of 5% promises rewards for investors.
High Rates to Offer Support: With the Federal Reserve likely to keep interest rates high in the near term, JPMorgan’s net interest income (NII) and the net yield on interest-earning assets are expected to continue witnessing growth. Yet, rising funding and deposit costs are expected to weigh on NII and margins to some extent. The company projects NII to be roughly $87 billion this year (up from the prior guidance of $84 billion). We expect NII (reported) to jump 29.9% in 2023. The metric is expected to fall 10.9% next year and then rebound and grow 2.8% in 2025.
Strategic Acquisitions: JPM has been continuously expanding its operations in new regions by acquiring both domestic and international companies. In May, the company acquired Aumni and failed First Republic Bank. Last year, it announced a deal to buy Renovite, while it acquired a 49% stake in Greece-based Viva Wallet and Global Shares. These deals, along with several others, are expected to keep supporting the bank's plan to diversify revenues and expand the fee income product suite and consumer bank digitally.
Organic Footprint Expansion: In 2018, JPM announced plans to enter 25 new markets by opening 400 new branches. The company has made substantial progress on this front, with a presence in 48 of 50 U.S. states. In addition to enhancing market share, the strategy will help the bank grab cross-selling opportunities by increasing its presence in the card and auto loan sectors. Additionally, the company launched its digital retail bank Chase in the U.K. in 2021 and plans to further expand the reach of its digital bank across the European Union countries. JPMorgan is also focused on expanding the CIB and AWM businesses in China.
Green Shoots in IB Business: Global deal-making came to a grinding halt since last year on elevated inflation, higher rates, worsening macroeconomic outlook and volatility across the global financial markets. Hence, JPMorgan’s IB fees plunged 59% in 2022 and 12% in the first six of 2023. But now the company is seeing encouraging signs in the business, which is likely to rebound and grow at a decent pace once the macroeconomic and geopolitical ambiguity is over.
JPMorgan is likely to witness growth in IB fees driven by a healthy IB pipeline and active merger & acquisition market and leverage its top position to further gain from the changed scenario. While we expect IB fees to decline 13.9% in 2023, the same will rebound with 27.6% year-over-year growth in 2024.
Enhanced Capital Deployments: JPMorgan’s capital deployment activities seem impressive. Following the clearance of the 2023 stress test, the company intends to increase its dividend by 5% to $1.05 per share, which follows no change in dividend payout last year. Also, it plans to continue with its previously announced share repurchase program. It announced earlier that it intends to repurchase shares worth $12 billion this year. Driven by a strong capital position and earnings strength, the company is expected to sustain current capital deployments.
Superior Return on Equity (ROE): JPMorgan has an ROE of 17.29%, higher than the industry average of 13.26%. This shows that the company reinvests its cash more efficiently than its peers.
Other Banks Worth a Look
A couple of other top-ranked stocks from the banking space are PCB Bancorp (PCB - Free Report) and Popular, Inc. (BPOP - Free Report) .
PCB Bancorp currently carries a Zacks Rank #2 (Buy). Earnings estimates for 2023 have been revised 3.8% upward over the past 30 days. In the past three months, PCB’s shares have gained 18.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings estimates for Popular have been revised 10.5% north for 2023 over the past 30 days. Shares of BPOP have rallied 26.4% in the past three months. Currently, the company also carries a Zacks Rank #2.