Wells Fargo is staying bullish on JPMorgan ahead of its earnings report premarket Friday — even as the stock keeps rising. Analyst Mike Mayo kept his overweight rating on the Jamie Dimon-led bank, calling it his top pick in the group. His $174 price target implies shares could rally more than 17% from Wednesday’s close. ( Citigroup , which also reports Q2 results on Friday, is Wells Fargo’s next top pick.) Wall Street’s consensus estimate for 2023 earnings have increased by 13% since the start of the year, while peers have seen theirs fall by an average of 15%, Mayo said. “JPM exemplifies our ‘Goliath is Winning’ theme,” Mayo said in a note to clients on Wednesday. “JPM stands out as the only large bank with consensus 2023 EPS ests. that are higher than at the start of the year; its P/E has also de-rated by 30% since 2019 despite less risk, in our view.” And Mayo said the bank has shown greater resiliency given rising interest rates, the possibility of a recession and increased government regulation. That’s due to the acquisition of shuttered First Republic , low exposure to commercial real estate loans and having already experienced strict oversight as a globally important bank. But Mayo said JPMorgan’s price-to-earnings multiple has fallen along with other banks and its P/E is still below pre-pandemic levels and the S & P 500 ‘s average, despite the stock hitting new 52-week highs in July. Mayo said the stock should re-rate closer to its historical level. Meanwhile, JPMorgan’s three-year earnings growth has outpaced the stock price, with earnings per share expected to climb by about one-third between 2019 and the end of 2023, whereas the stock will have only increased around 6% over the same time period. Despite increased confidence that the company’s operating leverage is turning around and company expenses are becoming more disciplined, Mayo noted risks that could hurt the stock, including how capital markets perform more broadly and if funding costs accelerate. Despite a topsy-turvy year amid the banking crisis, the stock has added more than 10% since 2023 began. It currently trades at a price not seen since early 2022. JPM YTD mountain JPMorgan, year to date — CNBC’s Michael Bloom contributed to this report.
