J.P. Morgan Chase & Co. (NYSE:JPM) was downgraded to ‘Neutral’ from ‘Buy’ this morning by BofA/Merrill analyst Erika Najarian, who said that while JPM’s revenue power is likely to remain best-in-class, the 150 basis points reduction in the fed funds rate will hurt the company.
The analyst lowered the bank’s earnings per share (EPS) estimates for fiscal 2020 and 2021 by 24% to $8.08 per share and 34% to $7.55 per share, respectively, with higher credit provisions driving about 70% of those cuts. In a note to clients, the analyst said the reductions reflect a possible U.S. recession which could be followed by a U-shaped recovery.
Najarian, who reduced JPM’s price target by 47 points to $100 per share, implying less than 2% upside over the next 52-weeks from Thursday’s closing price of $98.12, also said that credit performance in the banking industry is likely to be the most challenged for personal loans and the commercial & industrial segment. The analyst added that when the economy recovers, she sees peers bouncing back harder than JP Morgan, given their lower average valuations.
JP Morgan stock was down nearly 6% to $92.47 in Friday’s early session. The name is down 8% year-over-year versus the S&P 500’s 7.2% loss.