Banking, finance, and taxes

Why Analysts Are Taking Mixed Stances on These 2 Megabanks

Chris Lange

Published: July 15, 2020 12:31 pm

JPMorgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co. (NYSE: WFC) were two of the first banks out of the gate this earnings season. The tale of the tape was drastically different for each bank, and this was reflected somewhat in what analysts are saying about them after the fact.

24/7 Wall St. has included some brief highlights from each of the earnings reports

JPMorgan reported diluted earnings per share (EPS) of $1.38 on managed (adjusted) revenue of $33.82 billion. In the same period a year ago, the big bank reported EPS of $2.82 on managed revenue of $29.48 billion. Second-quarter results also compare to the consensus estimates for EPS of $1.04 on revenue of $30.29 billion.

Book value per share was $76.91, and tangible book value per share came in at $61.76.

JPMorgan stock traded up less than 1% on Wednesday, at $98.88 in a 52-week range of $76.91 to $141.10. The consensus price target is $112.72.

For the second quarter, Wells Fargo was on the other side of the coin. It posted a net loss of $0.66 per share and $17.8 billion in revenue. The consensus estimates had called for a net loss of $0.20 per share and revenue of $18.4 billion. In the same period of last year, Wells Fargo said it had EPS of $1.30 and $21.6 billion in revenue.

Book value per common share was $38.67, and tangible book value per share was $31.88.

Wells Fargo stock traded up about 3% to $25.01, in a 52-week range of $22.00 to $54.75. The consensus price target is $29.54.

A couple of things stand out here. First is that Wells Fargo posted a massive quarterly loss for the first time in a decade, and that the book values for each of these companies offer a contrast to the current share price.

Wells Fargo trades at a deep discount to its book value, but legal issues and then COVID-19 have made it difficult for this megabank to overcome. On the other hand, JPMorgan trades at a premium to book value and, despite the pandemic, the bank posted an incredible bottom-line beat.

Analysts appear to feel the same way as a few weighed in on these two banks after earnings.

For JPMorgan, analysts were fairly positive. BMO Capital Markets reiterated an Outperform rating and raised its price target to $119 from $108. Goldman Sachs reiterated a Neutral rating with a $100 price target. Oppenheimer reiterated a Hold rating.

Wells Fargo saw analysts less positive, with one exception. Morgan Stanley reiterated an Equal Weight rating and lowered its price target to $25 from $27. RBC reiterated an Underperform rating and lowered its price target to $25 from $29. Barclays reiterated an Equal Weight rating and lowered its price target to $33 from $40. The one exception was Evercore ISI, which upgraded Wells Fargo to Outperform from In-Line and raised its price target to $27 from $26.