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Morgan Stanley issues double upgrade for JPMorgan stock

Yahoo Finance Live anchors discuss Morgan Stanley’s Overweight rating on JPMorgan stock.

Video transcript

BRIAN SOZZI: All right, shares of JPMorgan Chase, we're also watching that after the bank received a rare double upgrade from analysts over at Morgan Stanley. The new price target by that team is $153 on JPMorgan. That's $30 higher than its previous price target. Morgan Stanley notes that JP Morgan will have positive operating leverage next year, meaning it will be in a better position to generate a revenue and bottom line profits.

Yeah, interesting. I mentioned this morning in our morning meeting how these double upgrades were such a rarity among Wall Street analysts, but we're seeing yet another one here. We've seen a bunch of other ones in different sectors over the past two months and to year end. But this one, perhaps, making a lot of sense. This now removes any sell ratings on JP Morgan on Wall Street and comes likely as margins get lifted with a couple more rate hikes in the fold.

BRAD SMITH: Yeah, and it's particularly interesting, too, after the commentary that we've continued to hear from JP Morgan CEO Jamie Dimon, who has talked about everything from an economic hurricane, even to what a recession may look like going into 2023.

But for JP Morgan and some of perhaps the resumption of deal making and being able to underwrite some of those larger deals that perhaps do finally make their way into the public market next year after the quiet year that 2022 was, especially on the number of companies that went public or that were just looking for underwriters to be able to finance some of the larger deals as well, that could perhaps be one of the larger upsides that is baked into this, too, going forward from here, when that resumes.

JULIE HYMAN: JP Morgan is down about 17% year to date, which is an under or overperformance, depending on what you measure it against. The S&P Bank Index, that's going in today, by the way. The S&P Bank Index was down 21%. But the KBE ETF was down 14%, so I guess, again, it depends upon what basket you're looking at it against.

But Betsy Graseck and her team, in making this call and this upgrade, says it really has to do with an inflection in operating leverage, that that is going to improve for the bank, that risks around operating leverage skewed to the upside. The company is also looking at the ratio requirements. Remember, the government has various capital ratio requirements for the banks, especially in the wake of the financial crisis. They got more stringent. And she is talking about that the company is making progress towards meeting those capital ratio requirements.

BRIAN SOZZI: And look, it keeps them-- keep in mind we're hearing from Jamie Dimon today. JPMorgan CEO warning about a potential recession. I like what Matt Maley told us, though, on these bank stocks. They will not be immune, of course, to a recession, even if rates go higher and margins benefit.