With shares of JPMorgan Chase (NYSE:JPM) trading around $51, is JPM an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s MovementJPMorgan Chase is a financial holding company that provides various financial services worldwide. The company is engaged in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management, and private equity. Financial services companies like JPMorgan Chase are essential for well-functioning economies around the world.
JPMorgan Chase could pay between $3 billion and $7 billion to settle investigations into various suspicious practices that the bank is accused of. JPMorgan has offered $3 billion to end a probe into its mortgage business, The Wall Street Journal reports. According to the publication, the Justice Department has rejected that amount as too low due to the high number of cases involved. JPMorgan is facing a series of investigations by the Justice Department that include queries into its mortgage business, hiring practices in China, and energy trading.
T = Technicals on the Stock Chart Are MixedJPMorgan Chase stock has been doing well in the years extending back to the Financial Crisis. The stock is currently pulling-back to key levels. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, JPMorgan Chase is trading between its key averages, which signal neutral price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of JPMorgan Chase options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| JPMorgan Chase Options | 27.86% | 83% | 81% |
What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| October Options | Flat | Average |
| November Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Rising Quarter-Over-QuarterRising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on JPMorgan Chase’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for JPMorgan Chase look like and more importantly, how did the markets like these numbers?
| 2013 Q2 | 2013 Q1 | 2012 Q4 | 2012 Q3 | |
| Earnings Growth (Y-O-Y) | 32.23% | 33.61% | 54.89% | 37.25% |
| Revenue Growth (Y-O-Y) | 13.67% | -3.57% | 10.16% | 5.82% |
| Earnings Reaction | -0.30% | -0.60% | 1.01% | -1.14% |
JPMorgan Chase has seen rising earnings and revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings with JPMorgan Chase’s recent earnings announcements.
P = Weak Relative Performance Versus Peers and SectorHow has JPMorgan Chase stock done relative to its peers, Bank of America (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), and sector?
| JPMorgan Chase | Bank of America | Citigroup | Wells Fargo | Sector | |
| Year-to-Date Return | 16.76% | 22.61% | 25.05% | 22.64% | 20.63% |
JPMorgan Chase has been a weak relative performer, year-to-date.
ConclusionJPMorgan Chase is a bellwether in the banking space that forms an essential part of the United States financial system. Investigations continue as concerns rise on recent settlements. The stock has been doing well in the last several years but is now pulling-back to key price levels. Over the last four quarters, earnings and revenues have been rising, which has produced conflicting feelings among investors in the company. Relative to its peers and sector, JPMorgan Chase has been a weak year-to-date performer. WAIT AND SEE what JPMorgan Chase does this coming quarter.
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