With shares of JPMorgan Chase (NYSE:JPM) trading around $52, 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 is planning to spend another $4 billion on its risk and compliance issues, as the company remains under a number of investigations, The Wall Street Journal reports. The company also plans to hire 5,000 employees to bulk up its risk-control staff. The bank plans to spend $1.5 billion on better managing risk and making sure it’s complying with regulations, while the remaining $2.5 billion will go toward legal fees. "Fixing our control issues is job No. 1," CEO Jamie Dimon said to the Journal.
T = Technicals on the Stock Chart Are MixedJPMorgan Chase stock has been moving higher in the past several quarters. The stock is currently trading near prices not seen since before the financial crisis. 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 signals neutral price action in the near term.
Source: Thinkorswim
Taking a look at the implied volatility 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 | 29.04% | 93% | 91% |
What does this mean? This means that investors or traders are buying a 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 | Steep | Average |
| November Options | Steep | Average |
As of Friday, there is average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bearish over the next two months.
E = Earnings Are Increasing 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 increasing earnings and revenue figures over the past four quarters. From these numbers, the markets have had mixed feelings about 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), and Wells Fargo (NYSE:WFC) — and sector?
| JPMorgan Chase | Bank of America | Citigroup | Wells Fargo | Sector | |
| Year-to-Date Return | 19.70% | 46.52% | 27.63% | 23.76% | 25.19% |
JPMorgan Chase has been a poor relative performer, year to date.
ConclusionJPMorgan Chase is a bellwether in the banking and financial space that forms an essential part of the United States financial system. The company has allocated more funds toward risk and compliance issues, as it is still under investigation. The stock has been moving higher in recent quarters and is now trading near prices not seen since before the financial crisis. Over the past four quarters, earnings and revenues have been increasing. However, investors have had mixed feelings about the company. Relative to its peers and sector, JPMorgan Chase has been a year-to-date performance leader. WAIT AND SEE what JPMorgan Chase does this coming quarter.
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