Several Wall Street analysts have raised their price targets on JPMorgan Chase and Morgan Stanley this week — a bullish vibe ahead of the major banks' earnings reports next week.
In one of the most bullish notes, Keefe Bruyette & Woods analyst Christopher McGratty upgraded JPMorgan and Morgan Stanley to outperform from market perform. The analyst raised the price target on JPMorgan to 327 from 253, and on Morgan Stanley to 160 from 127.
That charts out upside of about 16% for JPMorgan, and about 14% for Morgan Stanley.
Keefe Bruyette is bullish on large-cap banks' long-term structural benefits of scale, according to TheFly.com. McGratty cited "business model superiority" for his upgrades on the two major banks.
Meanwhile, Truist raised its price target on JPMorgan to 290 from 280 and kept a hold rating as part of a preview of U.S. banks' Q2 results.
Morningstar analyst Suryansh Sharma raised the price target on JPMorgan to 235 from 195. The bank, Sharma said in a note to clients, "has an enviable competitive position, the deepest capability set, the most expansive geographical footprint, and most importantly, unmatched economy of scale among U.S. banks."
Sharma added that JPMorgan's aggressive tech investment and capital allocation set the stage for continued outperformance. Still, the analyst believes investors are overly optimistic about the stock.
"We do see a scenario where earnings per share grow faster than projected in the near term, but in our opinion, there are more risks to the downside," Sharma said.
Other Targets On Banks
Earlier this week, analysts at Deutsche Bank, Wells Fargo and Seaport Global Securities also raised their price targets on both banks, according to FactSet. Jefferies and RBC Capital Markets also raised their price target on Morgan Stanley.
However, HSBC downgraded JPMorgan to reduce from hold, but raised the price target to 259 from 237. The firm is cautious on universal banks following this spring's rally in the sector. While operating fundamentals appear healthy, share valuations are "stretched," an analyst said, according to TheFly.com.
Morgan Stanley will announce second-quarter results July 16 before the market opens. Analysts' consensus earnings estimate is $1.97 a share, an increase of 8.5% year over year. Revenue is expected to climb 6.6% to $16 billion, according to FactSet.
The stock broke out of a double-bottom base on May 12 and is now 12% extended from the 126.34 buy point, according to IBD MarketSurge pattern recognition.
Morgan Stanley, JPMorgan Chart Analysis
JPMorgan, the nation's largest bank, releases its quarterly results Tuesday before the market opens. Analysts expect earnings to rise 1.9% to $4.49 a share. Revenue is seen falling 14% to $43.8 billion.
The stock climbed to an all-time high July 3, then pulled back to the 21-day exponential moving average, where it appears to be finding support. Shares broke out of a double-bottom base at 254.67, also on May 12, and are now extended 12% from that entry.
JPMorgan stock has a 21-day average true range (ATR) of 1.86%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
Morgan Stanley has an ATR of 1.77%.
