JPMorgan Cut Down To Market Perform At KBW As Shares Are Described As Relatively Expensive

It is indeed no doubt that shares of JPMorgan Chase and Co has been a hot stock in 2019 and it climbed to nearly 40% from the beginning of the year till now. However, a note obtained from KBW on Tuesday described the stock as relatively expensive. KBW earlier promoted the stock to outperform on expectations for higher capital return and balance sheet growth. Currently, the firm says the outperformance in 2019 was driven by shares re-rating after the sell-off in the later part of 2018. The firm said they hope look to add shares when valuations are more reasonable and a Market Perform at this point in time was warranted.

Keefe, Bruyette & Woods (KBW) is a full-service, boutique investment bank and broker-dealer that specializes in the financial services sector. KBW operates in North America and Europe, providing institutional & private investors and financial services companies with research, equity sales & trading, capital raising, and strategic advisory services.

Even though KBW views the New York bank as the best in class, the firm cut down the bank's rating to market perform from outperform on its expectation that the estimated earnings of JPMorgan are done climbing.

Analyst, Brian Kleinhanzl wrote, "Investors should own stocks where consensus earnings estimates have the potential to rise. Upside to JPM shares is limited."

KBW's target price on JPMorgan is $135 a share, and they closed off 0.5% at $134.41 on Monday.

According to KBW, shares of JPMorgan and the rest of the banking sector pulled back sharply in late 2018 , setting up JPM stock for the gains it saw in 2019. The analyst wrote, "JPM is currently trading at 12.6 times our 2020 estimate and this is near the high for the company's recent history, we would look to add shares when valuations are more reasonable. KBW's bank index has seen a 29% year to date gain and the S&P 500 is up by 25% in 2019. KBW has a neutral rating on "universal" bank stocks in 2020 with a forecast of 6.9% earnings year-over-year growth for the median universal bank stock.

 Analyst, Brian Kleinhanzl further said, "Capital return and underlying fundamentals are stable, but we expect the group to struggle to have a positive operating leverage against a flattish yield curve and growth that remains fairly anemic."

Few days ago, JPMorgan predicted a $410 billion bump to its stocks' demand and supply balance. JPMorgan strategists led by Nikolaos Panigirtzoglou said they foresee an improvement in the demand for equity and supply of about $410 billion, when calculated by adding up the projected demand flow changes and subtracting the supply change compared with that of 2019.

Investing Port hopes to keep an eye on the shares of JPMorgan to see if this downgrade by KBW will have an effect on the price of JPM stocks.