Readers of this space know that the investment thesis offered here favors large-cap companies with demonstrated business models that have a competitive advantage in established markets, preferably with a favorable global trend as a support. Still, every once in awhile an exception is made, in this case to get-ahead-of the-curve regarding a sector's recovery, and with the aforementioned in mind, JP Morgan Chase is worth an evaluation.
JPMorgan Chase (NYSE: JPM) is the third largest financial services firm in the United States.
Analysts like JPMorgan's solid organic growth prospects, diverse product lines and wide geographic footprint. JPM has more than 3,000 retail bank branches.
Equally significant, analysts believe JPMorgan's subprime related asset exposure is manageable: it's in a much better position than its peers. Furthermore, analysts expect strong growth in asset management fees and in treasury/securities services to offset slumps in investment banking and credit quality. The Reuters F2007/F2008 EPS consensus estimates for the company are $4.18/$4.58.
The risks? Unexpected increases auto loan and credit card defaults would obviously hurt JPM's results.
The First Call mean rating for JPMorgan is: Hold. [19 firms.] Mean 2008 target: $49.00. [high: $54, low: $42.]
Stock Analysis: JPMorgan Chase is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from its shares. Sell / Stop Loss if you were to purchase shares in this company: $28.
Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.
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Reader Comments (Page 1 of 1)
2-01-2008 @ 4:22PM
Steve in Denver said...
MMMMMM! JPM. Gotta love it. Actually, most any bank stock that has either steered clear of the sub prime baloney and / or has managed itself is correctly is probably a good buy. The lemmings of the media have so beaten down banks ancillary to the subprime issue that most of them are selling at below their prior paramaters. I'm gonna buy mor BAC, JPM, and some local public banks.
2-11-2008 @ 2:30PM
RJM said...
Steve,
Former 27-year CMB employee here. When I was shown the door in Jan. '01 in the first wave of JPM merger-related cuts, the price was 52 and change. The great Jamie Dimon was heralded as the cure for all that was ill with the Chase side of the operation, and in the past seven years since my departure the price has languished miserably.
Rumors of yet another small bank acquisition will surely depress any chance that a high exceeding the 52 threshold beyond any short-term hopes of even the most optimistic investor. My advice? Unless you're putting your cash into LONG-term entities, stay far away from JPM as there are always "excuses" for lack of growth, and the only ones profiting are Dimon and the cronies who comprise the BOD.