Shares of financial powerhouse JPMorgan Chase (NYSE:JPM) gapped down 9% at Friday’s open on some news delivered by Chief Executive Officer Jamie Dimon that we will get to in a moment.
Let’s take a look and see what has investors so riled up about this stock.
Last year, JPMorgan made headlines by becoming the largest bank in the United States in terms of assets; it currently boasts a $2 trillion portfolio. JPMorgan as we know it today was founded in 2000 when Chase Manhattan Bank and J.P. Morgan & Co. merged.
This multinational banking corporation has its hands in investment banking, asset management, private wealth management as well as treasury and securities services. With their headquarters in Midtown, Manhattan, the company employs over 261,000 worldwide.
After the closing bell on Thursday, JPMorgan announced that the company sustained heavy hedging losses of nearly $2 billion due to greater-than-expected volatility in the credit default swap market. While the company previously expected to post a profit of $200 million for the first quarter, management has downwardly revised is estimate to an $800 million loss.
After this announcement the company suffered a series of downgrades from analysts. FBR Capital Markets (NASDAQ:FBR) has downgraded JPMorgan Chase to Market Perform, and Nomura (NYSE:NMR) has lowered its earnings estimates for the rest of the year.
Out of the 230 companies in the Money Center Banks industry, JPMorgan is the largest player in terms of market cap. Most notably, JPMorgan’s 3% dividend yield is eleventh in the industry. The company also stands out in terms of its Price/Earnings to Growth ratio (36th) and its long-term growth rate (45th).
However, this company falls in the middle of the pack in terms of sales and earnings growth. JPMorgan Chase’s largest competitors are Bank of America (NYSE:BAC), Barclays PLC (NYSE:BCS) and Citigroup (NYSE:C). Of these three companies, JPMorgan is the largest and has the highest sales growth and operating margin growth.
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. Over the past 12 months, this stock has stayed down at a hold or sell.
To start, JPMorgan has had a difficult time improving its fundamentals. The company is especially weak in terms of earnings growth and sales growth. Return on equity could also use some work. The company’s only areas of strength are its operating margin growth, track record of earnings surprises and cash flow. Additionally, buying pressure for this stock has been lackluster for some time now. All-in-all, this is a C-rated stock.
Bottom Line: JPM is currently a C-rated hold, but after this terrible earnings report it is possible that I may downgrade this stock over the weekend.
If you hold shares of JPM, I recommend that you revisit my Portfolio Grader page this Monday to see if there have been any updates.
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