At the beginning of the year, JPMorgan (JPM) startled investors with increased spending plans and reduced share buybacks.
Shares fell sharply after the January earnings release as the bank acknowledged it expects to underperform, Real Money Columnist Brad Ginsein noted at the time.
“The bank’s CFO spelled that out to analysts: 'We are in for a couple of years of sub-target returns,'” Ginesin noted. “These are words unexpected to be heard from JPMorgan management.”
But given historical performance and its dominant position, the share decline was at least a cue to start keeping an eye on the stock.
Ginesin noted that “in general, patiently waiting to buy quality stocks on real weakness makes sense. JPMorgan has the premier banking operation worldwide and ramping up expenses to invest in talent and technology will help secure its competitive position.”
In addition, “since the 2008 financial crisis, few bank stocks have performed more consistently than JPMorgan Chase,” Ginesin wrote. “Over the years, it's one of the first stocks I've looked to buy on weakness. The shares commonly sell off on earnings days as a sell-the-news event."
But although he was intrigued, Ginesin was also cautions. “Given the reduced earnings outlook, waiting for a better entry price below $150 is prudent.”
That caution proved prescient. The bank reported more disappointing results, earlier in April, for the first quarter.
Earnings for the period came in at $8.3 billion, or $2.63 per share, down 42% from the same period last year and 6 cents shy of the Street consensus forecast of $2.69 per share. JPMorgan also built $902 million in reserves to set against bad loans and credit losses linked to surging domestic inflation and Russia's war on Ukraine, the bank said.
Shares started the last week of April off $1.11 at $125.70, their lowest level in more than two years and 27% off its 52-week high of $172.96.
As long as stocks are caught up in a burgeoning bear market, JPMorgan remains one to keep an eye on.
