JPMorgan Higher on Optimism About Stimulus, Valuations

JPMorgan shares could benefit from fiscal stimulus, and bank stocks are relatively cheap, two analysts say.
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JPMorgan Chase  (JPM) - Get Report shares rose Thursday, amid analyst upgrades for the giant bank on enthusiasm about fiscal stimulus and valuations.

Analysts say Democrats’ sweep of Georgia’s Senate seats, giving the party control of the chamber, augurs well for stimulus.

JPMorgan shares recently traded at $135.39, up 2.5%. They'd gained 15% in the 12 months through Wednesday.

Bank of America analyst Erika Najarian raised her rating on JPM to buy from neutral and her price target to $160 from $131.

JPMorgan "is uniquely better-positioned to benefit from these themes versus big banks we cover: a stimulus-aided comeback of the U.S. consumer, the potential return of travel and restaurant spending, and the steepening of the [yield] curve,” she wrote in a commentary.

“While JPM had a very strong trading year in 2020, we think the tailwinds are even stronger for 2021, offsetting normalization in markets revenues.” Najarian cited “credit leverage, a bottoming in quarterly [interest-rate] spread revenue, the comeback of the U.S. consumer and the return of buybacks.”

Meanwhile, Jefferies analyst Ken Usdin upgraded JPMorgan to buy from hold and lifted his price target to $152 from $110.

“Even after the ‘blue wave’ rip, ... banks’ relative price-earnings ratios remain attractive, and a case for absolute P-E expansion exists,” he wrote in a commentary cited by Bloomberg.

JPM will benefit from a “less bad” credit outlook; higher long-term interest rates; and an “eventual turn in loan growth,” Usdin said. This could generate strong deposit growth, better cost control and a resumption of share buybacks.