This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

JPMorgan Has Double Digit Downside: Analyst

Stocks in this article: JPM WFC PNC BBT PACW

NEW YORK ( TheStreet) -- Sterne Agee analyst Todd Hagerman on Monday said that he saw "10-15% further downside risk" to broker/dealer stocks, with "perhaps more for JPM as the review of the company's trading losses unfolds."

As the intense reaction continued, following JPMorgan Chase (JPM) CEO James Dimon's announcement late Thursday of a $2 billion second-quarter trading loss, the company announced on Monday that Chief Investment Officer Ina Drew had resigned.

Following a 9% decline on Friday, to $36.96, JPMorgan Chase's shares down another 3% in early trading Monday, to $35.98.

Hagerman said that investors were "stunned by the announcement, particularly considering most investors have some ownership position in JPMorgan Chase , particularly as a hedge against other potential risks tied to the broker/dealers as a whole," and that aside from some investors who were "more optimistic on the company, looking for a buying opportunity at or below tangible book value ($34.19)," most investors "most investors were decidingly more negative on not only JPM, but also the broker/dealers as a whole."

The increased risks for the broker/dealer space, according to Hagerman, include "the likelihood of more severe downgrades by Moody's next month, ongoing Eurozone risks, accelerating rules and toughened Fed position towards policy surrounding the Volker Rule, as well as likely diminishing revenues and profitability."

Hagerman added that "the outsized trading loss and break-down in internal controls could potentially place JPM under some form of supervisory action down the road following the completion of various regulatory reviews of the loss and associated enterprise risk management processes/controls," and that "the ongoing review and/or the possibility of supervisory action could possibly curtail, or even cease the company's capital buyback abilities sooner rather than later."

In March, following the completion of the Federal Reserve's annual stress tests, JPMorgan's board of directors authorized $12 billion in common share repurchases for 2012, with another $3 billion in buybacks authorized for the first quarter of 2013.

Hagerman has a neutral rating on JPMorgan Chase, with a $50 price target, estimating the company will earn $4.90 a share this year, followed by 2013 EPS of $5.50.

Citigroup analyst Keith Horowitz has a different take on JPMorgan Chase, saying on Friday that the shares offered investors the "best potential absolute returns in the space," among the largest U.S. bank holding companies, although he also said that he was "assuming lower buyback activity of $5 bln in 2012 to be conservative."

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • 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 Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs