What happened
Shares of banking giant JPMorgan Chase & Co. (NYSE: JPM) continued to tumble on Tuesday, down 4.2% as of 2:40 p.m. ET on the first trading day after JPMorgan reported its final quarter of earnings for fiscal 2021.
As you will recall, that earnings news was not all good.
Image source: Getty Images.
So what
Despite "beating earnings" on both the top and bottom lines, JPMorgan shares sold off on Friday as investors digested news that its earnings had declined 14% in the quarter. Worse, the company's CFO warned investors that the bank will have to suffer through "a couple of years of sub-target returns."
Two years appeared to be too long a time to wait for a return to normal for some analysts on Wall Street. Since JP reported, its stock has been downgraded once (by Wells Fargo, on Friday) and had its price target cut no fewer than five separate times -- four of which happened this morning.
In a rat-a-tat-tat machine-gunning of JP's prospects, First Barclays Capital cut its price target on the megabank to $200 a share, then UBS cut to $197, then Piper Sandler said $187, and finally the cruelest cut of all came from Citigroup in whose estimation JPMorgan stock is now worth no more than $175.
Now what
And yet...even a $175 price target still leaves 16% upside for JPMorgan shares, based on the stock's current price, whereas if Barclays is to be believed, JP stock is actually selling for a 25% discount and could rise as much as 32% over the next 12 months!
As it turns out, of the seven separate analysts who have weighed in on JP's report since earnings came out, the majority chose to keep "buy" ratings on JPMorgan stock, reports TheFly.com, and none of the analysts rate JP a "sell." The worst rating of the seven is currently "neutral." The reason? While it's true that the bank's projected expenses appear to be higher than Street analysts had bargained for, so too was the company's interest income in the quarter.
At a price-to-earnings (P/E) ratio of just 10 times trailing earnings, and with a very respectable 2.5% dividend yield on the stock, it's hard to call JPMorgan shares expensive. Investors who are selling off JP today may be making exactly the wrong call.
