XLF - Is JPMorgan a buy after crushing its latest earnings report?

2023-04-19 13:34:39 ET

Concerns about the recent bank crisis have faded in recent weeks, in part thanks to stronger-than-expected earnings from some of the world's largest financial institutions. JPMorgan Chase ( NYSE: JPM ) was among the firms announcing strong results.

Does the largest U.S. bank still represent a buy after the latest upswing inspired by its quarterly update?

Strong Earnings & Guidance

JPMorgan has rallied 9% since its latest Q1 earnings beat, taking shares to a level near $140.75 in Wednesday's intraday action. This was just off a six-week high set earlier this week.

Looking at the recent results, the New York-based bank posted Q1 GAAP EPS of $4.10, surpassing estimates by $0.69. At the same time, the company delivered revenue of $38.3B, up almost 25% from last year and $2.53B above projections.

Explaining the firm's results, CEO Jamie Dimon said , "The U.S. economy continues to be on generally healthy footings —consumers are still spending and have strong balance sheets, and businesses are in good shape."

JPMorgan saw volatile trading in response to the banking crisis, which was sparked by the collapse of Silicon Valley Bank and other institutions. Weighed down by general concern about the industry, JPM hit a closing trough for the crisis of $124.91 on March 24. This marked its lowest finish since last October.

However, shares have rebounded significantly from that level, helped recently by the earnings news. JPM is up almost 13% since that March 24 close. Meanwhile, the stock has returned to positive territory for the year, now sitting at +4.1% over the course of 2023.

Is JPM a Buy?

Wall Street analysts have an upbeat appraisal of JPMorgan, with 18 of the 26 analysts surveyed over the last 90 days giving the stock either a Buy or a Strong Buy rating. At the same time, another 8 experts view the bank as a Hold.

Meanwhile, Wall Street gives JPM an average price target of $157.71. This would equate to a nearly 12% upside move from current levels. At the extremes, the highest price target is $192 and the low-end target is $131.

Elsewhere, Seeking Alpha's Quant Ratings are a little bit more reserved about JPMorgan ( JPM ), labeling the stock as a Hold. The system of grading quantitative measures gave the bank a D+ regarding its valuation and a D- pertaining to growth. This was counteracted by an A+ when looking at profitability and an A when examining its momentum.

See a breakdown below:

What Others Say

Most Seeking Alpha contributors lean towards the bullish end of the spectrum when it comes to JPMorgan. For example, Tim Tavis sees the organization as a Buy , saying "JPM is too high quality of a bank to trade at just over 10x normalized earnings, given its return profile, and counter-cyclical business footprint."

Looking at another bullish take, fellow SA contributor The Asian Investor argued that JPM's results "prove that there is no financial crisis in the sector" and called the firm "a solid buy for investors."

Other Options

For investors that are unsure about JPMorgan, they can always access exposure to the company in a diversified way through the use of exchange traded funds. JPM is owned by 287 funds. Listed below are the five funds that have the heaviest weightings towards the bank.

• iShares U.S. Financial Services ETF ( IYG ) at 11.32%.
• Financial Select Sector SPDR Fund ( XLF ) at 10.68%.
• iShares U.S. Financials ETF ( IYF ) at 9.60%.
• Fidelity MSCI Financials Index ETF ( FNCL ) at 8.84%.
• First Trust Nasdaq Bank ETF ( FTXO ) at 8.53%.

At the same time, investors can also look to examine some of JPMorgan's closest competitors. Some of those names include the following: Bank of America ( BAC ), Wells Fargo ( WFC ), and Citi ( C ).

In other JPMorgan related news, CEO Jamie Dimon was ordered to provide as many as two days of testimony in lawsuits that claim the bank facilitated Jeffrey Epstein’s alleged sex-trafficking.

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