An All-or-Nothing 2012 for JPMorgan Chase

With 2012 just beginning, now's a smart time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.

Today, let's take a look at JPMorgan Chase (NYSE: JPM  ) . As I discussed last month, the Wall Street bank didn't have a very good 2011, although it did manage to hold up better than many of its banking peers. With financial challenges around the world, JPMorgan faces a tough road ahead. Can it successfully navigate the threats and recover from 2011's losses? Below, I'll take a closer look at what people expect from JPMorgan Chase and its rivals.

Forecasts on JPMorgan Chase

Median Target Stock Price $46
2011 EPS Estimate $4.52
2012 EPS Estimate $4.80
Expected Annual Earnings Growth, Next 5 Years 8%
Forward P/E 7.5
CAPS Rating (out of 5) ***

Sources: Yahoo! Finance, Motley Fool CAPS.

Will JPMorgan Chase get back on track in 2012?
Analysts see good things ahead for JPMorgan. At $46, the target price for the stock is about 25% higher than current prices, and continued earnings growth of 6%, while slow, would certainly justify the attractive earnings multiple the bank sports right now.

One thing that JPMorgan has going for it is a considerable advantage in dividends over some of its peers. Bank of America (NYSE: BAC  ) tried and failed to get approval from the Federal Reserve to boost its quarterly payout above its penny-per-share level. Citigroup's (NYSE: C  ) $0.01 payout is even more insignificant after its 1-for-10 reverse split last spring, and both Citi and B of A continue to have challenges that could make it tough to boost payouts significantly anytime soon. Meanwhile, in contrast, JPMorgan's 2.8% dividend yield has it looking more like its former pre-crisis self.

One interesting area where the company appears to be playing a major role is in the MF Global bankruptcy. As fellow Fool Matt Koppenheffer reported, JPMorgan was custodian for the failed firm's segregated customer accounts and MF's biggest lender. But it's also making offers to buy bankruptcy claims from customers at a discount, which could lead to profits if customer funds are ever found. As MF and the CME Group (Nasdaq: CME  ) hash out responsibility over lost customer money, JPMorgan's behavior raises concerns about conflicts of interest and playing both sides.

What will really determine JPMorgan's fate in 2012 is the state of the economy. With interest rates purportedly on hold through mid-2013 at the earliest, the bank could see rising interest margins if the economy starts to speed up. That would further boost profits and mean what's likely to become a full recovery for JPMorgan.

JPMorgan's Chase credit card division is huge, but it has to get ready for a world where credit cards could become a thing of the past. Some stocks are already placed to take advantage of changes in the way we pay. Watch this free video to discover why your credit card may soon be absolutely worthless -- but don't wait. Click here to see it while it lasts.

Click here to add JPMorgan Chase to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Citigroup, Bank of America, and JPMorgan Chase. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 16, 2012, at 10:27 PM, nickjob wrote:

    Until JPM coughs up customer money to MF Global customers, I would stay away.

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