Citigroup analyst Keith Horowitz raised his rating on JPMorgan shares to buy from hold, but the stock was trading slightly lower in recent action, down less than 1 percent to $40.18. That decline follows a plus 5% sell-off for the stock on Thursday after President Obama unveiled proposals to limit the size of banks and their ability to engage in certain investing activites, like hedge and private equity funds and proprietary trading.
Horowitz notes that the stock was off 3% overall in 2010 vs. a gain of 11% in the Keefe Bruyette & Woods bank index over the same period. His 12-month target for the shares is $48.
Quantifying the impact of Obama's proposed reforms on individual companies is difficult this early in the game, and that uncertainty is part of why the stocks of JPMorgan, Bank of America (BAC), and Goldman Sachs (GS) have been so roiled by the news.Horowitz estimates that the removal of proprietary trading "would have a limited 2% impact on normalized EPS from assuming forced divestiture of private equity," for JPMorgan. "The other risk is [the] impact of 'size limits,' but we assign a very low probability that JPM will be forced to downsize its balance sheet given impact on credit availability," he writes. From a fundamental standpoint, Horowitz is bullish on JPMorgan because the company has been proactive about containing credit losses and has a "superior" capital position.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV