On Monday, Citi updated its outlook on JPMorgan Chase & Co. (NYSE: NYSE:JPM), raising the bank's price target from $205.00 to $215.00, while keeping a Neutral rating on the stock. The price target adjustment follows JPMorgan's second-quarter earnings, which showcased robust core results with revenue exceeding expectations and managed expenses. Despite the positive report, JPMorgan's shares saw a slight decline, dropping 1.2% compared to the Bank Index (BKX), which only fell by 0.3%.
The bank's performance prompted questions regarding its return outlook and capital plans, especially as management pointed to overearning, particularly on net interest income (NII), where deposit margins are higher than historical norms. Additionally, impending changes to capital regulations were noted as significant uncertainties. Citi acknowledges a potential slight increase in the consensus earnings per share (EPS) estimates for 2025-2026 and includes a normalized return on tangible common equity (ROTCE) of 18%, which is above the management's target of 17%.
Despite the bank's current trading at what is considered the lowest implied cost of equity among its peers at 9.1%, Citi suggests that JPMorgan's valuation fully reflects these metrics. The firm indicates that investors could find better risk/reward opportunities in the market, which underpins the decision to maintain the Neutral stance on the bank's shares. The revised price target to $215 is attributed to the anticipated upward revisions in JPMorgan's earnings per share.
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