JPMorgan: Path to All-Time Highs Looks Clear Amid Bullish Analyst Sentiment
2024.10.15 07:38
- JPMorgan Chase had a better-than-expected quarter and raised guidance; this stock can resume its uptrend and hit new highs.
- Credit reserve build-ups are a concern but have had little impact on earnings power, leaving the capital return outlook unchanged.
- Analysts’ activity shows an increasingly high conviction that a new high will be set this year.
JPMorgan Chase (NYSE:) stock can hit new highs in 2024 because the fear induced by September’s guidance warnings was misplaced, the were better than expected, cash flow and capital returns remain solid, and the trend in analysts’ sentiment is leading to a new all-time high.
The takeaway is that September’s sell-off was a buying opportunity that is still in play, and this stock has a double-digit upside potential likely reached before the year’s end. Assuming the company continues to outperform, the odds are high that analysts’ revisions will continue to move higher and help sustain upward momentum in this stock next year.
JPMorgan’s Diversified Business Drives Results, Income Growth
JPMorgan’s Q3 2024 results are not without bad news. However, the weakness in consumer segments was offset by strengths in every other significant banking business segment, resulting in YoY revenue and GAAP EPS growth. The $43.32 billion is down sequentially but up 6% compared to last year.
Consumer and Community Banking is the weak link, with revenue down by 1% and net income down by 3%. Asset & Wealth Management was strongest with a gain of 9%, followed by an 8% gain in Commercial Investment Banking driven by fee increases and organic traffic. Within CIB, investment banking revenue grew by 29%.
The margin news is mixed but ultimately good for investors. While net income in the consumer segments fell by double-digits, solid gains in CIB and AWM offset it. Firmwide net income rose versus the prior year, outpacing the consensus to leave the GAAP EPS at $4.37. The $4.37 outpaced the consensus estimate by $0.36 and is significant because of the increase in credit reserves.
Credit costs rose compared to last year and the prior quarter, outpacing the consensus, with the quarterly build 90% higher than last year. The build-up and weakening of consumer markets are concerning but not a problem for this bank. The Tier 1 credit ratios remain well above target at 15.3%, with a total loss-absorbing capacity of $544 billion, leaving it well-positioned to continue expanding operations while returning capital to shareholders and growing its distributions.
The guidance is good. The company continues to expect an impact from falling interest rates but less than previously. The new guidance for net income was increased by $1.5 billion or about 160 basis points to $91.5 billion, 80 bps ahead of consensus forecasts, more than sufficient to sustain the capital return outlook.
Analysts Lead JPMorgan Stock to New Highs
The analysts’ activity has been mixed since the guidance warning in September. The few revisions tracked by MarketBeat include several price target reductions and one downgrade to Equal Weight from Overweight offset by price target increases. The critical details are that this stock is rated at Moderate Buy with a narrowing price target range showing an increasingly high conviction the stock will move to a new high.
The consensus assumes fair value at $212 but is rising in the 30-, 90-, and 365-day comparisons with 85% of the estimates issued since the Q2 results in July above. The high-end range is $230 to $240, a new all-time high 10% above the price action in mid-October.
JPMorgan Fires Trend-Following Signal
The price action since early September includes a sell-off followed by a bounce and a second bounce from higher support levels. The action aligns with a trend-following entry, showing solid support compounded by bullish crossovers in the indicators.
The MACD shows the market is in the early stages of a bullish swing, while stochastic shows a strong crossover, with the %K line crossing above %D and the upper signal line. The market for JPM stock could retest the all-time high soon in this scenario; a move to new highs would be bullish and bring technical targets into play that are above the high end of the analyst range. 
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