Against the Grain: Analyst Issues Rare ‘Sell’ Call on JPMorgan Amidst Praise

Following a dramatic surge in its stock price, JPMorgan Chase (JPM) experienced a pullback after Baird analyst David George recommended a “sell” on the stock, citing overvaluation concerns. Despite acknowledging JPMorgan’s stellar attributes like its scale, skill, and dominant market share, George’s analysis pointed to an imbalance between the stock’s current price and the potential for further gains, leading to his advice for investors to take profits.

JPMorgan’s shares had soared to a record high of $248 a share on Wednesday, fueled by a broad market enthusiasm for financial stocks, driven by expectations of a more favorable regulatory environment under a potential second Trump administration.

The stock’s nearly 12% leap was the largest daily percentage gain since November 2020, reflecting a sector-wide uplift that saw gains in both large banks and regional institutions, as well as in related sectors like private equity and payment services. However, this euphoria was short-lived as the stock retreated by 4.5% on Thursday, even as the broader market, represented by the S&P 500 (SPX), edged up by 0.40%.

George highlighted in his report that JPMorgan was trading at about 2.6 times its tangible book value, with its price-to-earnings ratio for 2026 earnings projected at over 14 times. These metrics suggest that the stock might not offer significant upside from its current levels.

He further noted the bank’s cautious approach towards stock repurchasing, referencing comments from CEO Jamie Dimon during an investor day in May where he explicitly stated the bank’s reluctance to buy back shares at the prevailing high prices. Dimon’s comments came in the context of a substantial rise in JPMorgan’s stock price, which had surged about 40% over the preceding year, reaching a peak of $205.88 before his remarks. Dimon emphasized that stock buybacks at such times do not equate to returning cash to shareholders but rather benefit those exiting the company.

Despite the possibility of regulatory relief that could potentially free up capital for buybacks or other shareholder-friendly actions, George expressed skepticism about whether JPMorgan’s management would capitalize on this opportunity in line with market expectations. His analysis suggests that the bank’s strategic decisions might not align with the market’s current optimistic outlook, potentially tempering the stock’s growth prospects.

This nuanced perspective from Baird comes at a time when investor sentiment has been significantly swayed by political developments, with expectations of a rollback in stringent regulations potentially boosting sector profitability.

However, George’s recommendation serves as a reminder of the complexities involved in valuing stocks like JPMorgan, where even with strong fundamentals, price expectations can sometimes outstrip reality, leading to adjustments in investor portfolios.

Price Action: As of writing, JPM shares are up less than one percent to $238.52.

Reference: Barron’s

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