JPMorgan Stock Gained 17% YTD, What’s Next?

JPMorgan’s stock (NYSE: JPM) has gained approximately 17% YTD, as compared to the 14% rise in the S&P500 over the same period. Notably, JPMorgan’s peer Citigroup (NYSE: C) is up 20% YTD. Overall, at the current market price of $199, JPM stock is trading 4% below its fair value of $208 – Trefis’ estimate for JPMorgan’s valuation. 

Amid the current financial backdrop, JPM stock has seen extremely strong gains of 65% from levels of $120 in early January 2021 to around $200 now, vs. an increase of about 45% 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 surpassed the street estimates in the first quarter of 2024, with net revenues of $41.9 billion – up 9% y-o-y. It was primarily driven by a 124% jump in corporate revenues, followed by a 7% rise in consumer & community banking, a 13% gain in commercial banking, and a 7% increase in the asset & wealth management division. Markedly, the net interest income (NII) (including all segments) improved by 11% y-o-y, which contributes around 60% of the top line. On the cost front, the provisions for credit losses decreased by 17% to $1.9 billion. However, it was more than offset by a 13% rise in the total noninterest expenses. Altogether, the net income rose by 6% y-o-y to $13.4 billion.

The bank’s top line grew 23% y-o-y to $158.1 billion in FY 2023, primarily because of a 34% y-o-y jump in the NII and an 11% rise in the noninterest revenues. On the cost front, the provisions figure witnessed an unfavorable increase from $6.4 billion to $9.3 billion in the year. That said, the impact was somewhat offset by a drop in total noninterest expenses as a % of revenues. All in all, the net income was $49.6 billion – up 32% y-o-y.

Moving forward, we expect the same trend to continue in Q2. The consensus estimates for Q2 revenues and earnings are $40.99 billion and $4.40 respectively. Overall, JPMorgan’s revenues are estimated to touch $165.8 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 $16.42. This coupled with a P/E multiple of just below 13x will lead to a valuation of $208.

[1] Returns as of 6/25/2024
[2] Cumulative total returns since the end of 2016

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