NEW YORK ( TheStreet) -- JPMorgan Chase ( JPM) shares didn't seem phased on Friday after Citigroup upgraded the stock, calling the stock's recent underperformance an "excellent entry point." 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.
"With a conservatively marked balance sheet, and our unchanged EPS estimates of $2.90 in 2010 and $5.15 in 2011, we expect book value to grow, which we believe should provide investors downside protection," the note says. "With the stock trading at just 6.3x normalized EPS, plus our view that JPM is likely to get through the cycle quicker than peers with significant excess capital, makes upside in stock very attractive." Horowitz expects "normalized earnings" for JPMorgan Chase to be about $6.50 a share, including effects from potential regulatory changes. "While we cannot say with any certainty these hits will end any time soon, we believe at current prices these risks are 'priced in' and we feel very comfortable advising clients to aggressively add to positions at these levels for what we believe in the next couple years will be a $65-70 stock," Horowitz writes. --Written by Laurie Kulikowski in New York.