Should You Buy JPMorgan Stock Right Now?
June 28 2021 - 5:22AM
Finscreener.org
JPMorgan Chase (NYSE: JPM)
is a blue-chip stock that has consistently delivered outsized
returns to long-term investors. JPM stock has gained 410% in the
last 10 years and is up 194% in the last five years. Comparatively,
the
S&P 500 Index has returned 130% and 308% in the 5-year
period and 10-year period respectively.
Let’s see if the banking giant remains a top bet for investors
right now.
JPMorgan delivers stellar results
JPMorgan is the largest bank in the U.S. in terms of assets. It
reported a profit of $14.3 billion or $4.5 per share in Q1 on total
revenue of $32.3 billion. Comparatively, Wall Street had forecast
revenue of $30. 5 billion and earnings of $3.10 in the March
quarter. JPM managed to increase adjusted earnings by a stellar
470% year over year while net revenue rose more than $4 billion
compared to the year-ago period.
The primary reason for the huge bump in bottom-line was due to a
$5.2 billion rollback in the company’s built-up reserves for
potential credit losses. The excess reserves added $1.28 per share
to EPS after JPM established that the projected loan losses are
unlikely to materialize.
Company CEO Jamie Dimon explained that spending in the consumer
bank segment returned to pre-COVID-19 levels and was up 14%
compared to Q1 of 2019. Further, travel and entertainment spending
also rose 50% in March compared to February.
JPMorgan’s corporate and investment banking verticals as well as
its asset and wealth management divisions also performed well.
While investment banking fees grew 222% year over year, revenue
from fixed-income and equity markets also surpassed
expectations.
In JPMorgan’s Q1 press release, Dimon said, “With all of the
stimulus spending, potential infrastructure spending, continued
Quantitative Easing, strong consumer and business balance sheets
and euphoria around the potential end of the pandemic, we believe
that the economy has the potential to have extremely robust,
multi-year growth.”
What next for JPM stock and investors?
In April 2021, JPMorgan Chase issued $13 billion in bonds
following its Q1 earnings. The
top four banks in the U.S. issued a total of $40 billion in
bonds to take advantage of a low interest rate environment and
favorable credit conditions. The bond issue will also help JPM and
peers alleviate stress arising out of changing regulatory
requirements in the near term. According to industry experts, the
increase in liquidity positions will help JPMorgan to maintain
leverage requirements as well as provide it with the flexibility to
return capital to investors.
NOW, JPMorgan is eyeing the highly disruptive cryptocurrency
space right now. It may soon be the largest bank in the U.S. to
launch an actively managed cryptocurrency fund. Dimon is not a big
fan of Bitcoin and other digital assets. However, JPM is already
planning to launch a Bitcoin fund for a few of its private wealth
clients.
The widespread adoption of digital currencies and the
astonishing gains experienced in this space have forced
institutions to offer an investment product that tracks this asset
class. While most of the Bitcoin and cryptocurrency ETFs are
passively managed, JPMorgan might actively manage its fund for a
fee. It means the primary goal of such as fund will be to achieve
greater returns over a period of time compared to a passively
managed ETF.
The final takeaway
JPM stock is valued at a market cap of $466 billion. It means
the stock is trading at a forward price to sales multiple of 3.84x
and a price to earnings multiple of 11.7x. Comparatively, its
adjusted earnings are forecast to rise by 48% in 2021. Despite its
stellar returns, JPM stock also provides investors a tasty dividend
yield of 2.4%.
The banking heavyweight continues to expand its revenue base and
boost its liquidity position making it a solid bet in this mature
sector.
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