Up 38% Since The Start Of 2023, What Is Next For JPMorgan Stock?

+2.69%
Upside
186
Market
191
Trefis
JPM: JP Morgan Chase logo
JPM
JP Morgan Chase

JPMorgan’s stock (NYSE: JPM) has gained 38% since the start of 2023, as compared to the 32% rise in the S&P500 over the same period. Further, the stock is currently trading at $183 per share, which is 4% below its fair value of $191 – Trefis’ estimate for JPMorgan’s valuation

Amid the current financial backdrop, JPM stock has seen extremely strong gains of 55% from levels of $120 in early January 2021 to around $185 now, vs. an increase of about 35% for the S&P 500 over this roughly 3-year period. Admirably, JPM stock has outperformed the broader market in each of the last 3 years. Returns for the stock were 28% in 2021, -13% in 2022, and 28% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023.  In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for other heavyweights in the Financials sector including V, MA, and BAC, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could JPM see a strong jump?

The bank topped the consensus earnings estimates (Non-GAAP) in the fourth quarter of 2023. It posted net revenues of $ 38.57 billion – up 12% y-o-y. It was primarily driven by a 15% rise in consumer & community banking (CCB), an 18% jump in commercial banking, a 3% growth in corporate & investment banks, and an 11% gain in asset & wealth management divisions. Notably, the company drives more than 60% of the total revenues from net interest income (NII) (including all segments), which improved 19% y-o-y. That said, the provisions for credit losses witnessed an unfavorable increase of 21% to $2.76 billion. Further, total noninterest expenses also rose by 29% in the quarter. Overall, the net income declined 15% y-o-y to $9.3 billion.

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The bank’s top line grew 23% y-o-y to $158.1 billion in FY 2023. It was mainly due to a 34% y-o-y increase in the NII, followed by an 11% improvement in the noninterest revenues. On the cost front, the provisions figure swelled from $6.4 billion to $9.3 billion in the year. However, total noninterest expenses as a % of revenues posted a favorable drop. Altogether, the net income was $49.6 billion – up 32% y-o-y.

Moving forward, we expect the same trend to continue in Q1. Overall, JPMorgan’s revenues are forecast to touch $163 billion in FY2024. However, JPM’s adjusted net income margin is likely to see a slight dip in the year, resulting in an annual GAAP EPS of $16.00. This coupled with a P/E multiple of just below 12x will lead to a valuation of $191.

 Returns Feb 2024
MTD [1]
Since start
of 2023 [1]
2017-24
Total [2]
 JPM Return 5% 38% 153%
 S&P 500 Return 5% 32% 127%
 Trefis Reinforced Value Portfolio 4% 43% 633%

[1] Returns as of 2/28/2024
[2] Cumulative total returns since the end of 2016

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