Now Isn’t the Time to Hit the Panic Button on JPMorgan Stock

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JPM stock - Now Isn’t the Time to Hit the Panic Button on JPMorgan Stock

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JPMorgan Chase (NYSE:JPM) missed earnings estimates for the first time in nearly four years on Jan. 15. But investors were not panicking, instead they were looking to pick up JPM stock at a bargain.

The headline, which frightened many as they woke up, was that JPMorgan Chase profits badly missed estimates previously given for its profit by other big banks.

The bank holding company said it earned $7.06 billion, $1.98 per share, on revenue of $26.8 billion for the quarter. Analysts had been expecting $2.20 per share of earnings and hoping for $2.22, with net revenue of $27.1 billion.

In pre-market trading JPM stock fell 2.37%, opening below $98 per share. Traders who had piled into options, betting on a miss, were able to grab quick profits, and JPMorgan stock quickly recovered its footing once trading opened.

This Is Not the End

The failure of the world’s strongest bank to meet earnings estimates also cast an early pall on the broader market, which had been expected to rally. Dow Futures were down before the market opened, then reversed after trading began.

The bank’s fixed income trading room seemed to be at fault for the miss, with revenue of $1.86 billion against $2.2 billion expected. But the bank also increased its estimate of bad loans for 2019 by 18%, to $1.55 billion and CEO Jamie Dimon was downbeat on politicians in his conference call remarks.

Still, those looking for strength and stability may find today a good day to pile into JPMorgan Chase, which now sports a price to earnings multiple of 12.5, with a well-supported 80 cent per share dividend yielding about 3.2%, against a U.S. 10-year bond yielding 2.69%.

While a lot of analysts, and even management, seemed to focus on bad news in the report, there was also good news. Start with that $7.1 billion in profit, which was up 70% from a year earlier, bringing total profit for the year to about $31 billion. The bank said its book value per share rose to $70.35 per share. The ratio of its price to its book value stands at about 1.3, best among the biggest banks.

Tier 1 capital reserves rose to $184 billion, and it bought back $5.7 billion of shares while maintaining the dividend. Core lending was also up 7%, in line with the company’s expectations.

The picture painted by management was of a careful company managing a growing economy amid uncertain political trends, which sounds like business as usual. After falling to as little as $97.74 in pre-market trading, the shares quickly recovered their footing, and were trading near $100 per share within a few minutes of the market opening.

JPM Stock: Whither the Future

For baby boomer investors who will be retiring in droves over the next few years, JPMorgan stock stands out as a pure buy, with continuing growth, a fortress balance sheet and income that beats what you get from a government bond.

Our Serge Berger called JPM stock oversold as the year opened and at mid-month it’s still trading near those levels, indicating higher prices should be coming.

Goldman Sachs has written that JPMorgan Chase shares could fall 20% in a recession. Given that speculative stocks are often cut in half during recessions, that’s not bad news.

With a market that’s in a defensive crouch, and with holders of JPM stock growing more defensive as they retire, JPMorgan Chase looks like one of those stocks that you snap up on weakness, and that’s precisely what happened after the “disappointing” quarter.

Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.


Article printed from InvestorPlace Media, https://investorplace.com/2019/01/now-isnt-the-time-to-hit-the-panic-button-on-jpmorgan-jpm-stock/.

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