Stern Agee Sees Plenty of Upside for J.P. Morgan and Wells Fargo

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Stern Agee issued a research call on Monday that may have been lost in the shuffle with gold tanking and with a terror attack hitting the Boston Marathon. The firm raised its expectations for both J.P. Morgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co. (NYSE: WFC). The target prices are mixed when compared to the Wall St. consensus price targets.

J.P. Morgan Chase & Co. (NYSE: JPM) was given a new price target of $54, despite lower revenue with slower growth in most business lines. That price target is actually about $1.00 less than the consensus street target of $55.03, according to Thomson Reuters. Trading and a large reserve release offset a drop in its mortgage banking efforts. For 2013, Stern Agee’s operating estimate moves up by 10 cents to $5.50 in earnings per share, and the 2014 estimate remained $5.85 per share. The firm’s 12-month price of $54 implies about 1.2 times estimated 2014 tangible book value and about nine times the 2014 earnings estimate of $5.85 per share.

Wells Fargo & Co. (NYSE: WFC) was given a new target of $42, despite what the firm called sluggish earnings due to lower mortgage revenue and net interest margin compression. The firm liked the strong credit metrics of the bank’s customer base, as well as loan growth and a growth in low-cost deposits. Stern Agee is targeting earnings per share of $3.65 in 2013 and $4.00 in 2014. The firm’s $42 price target compares to the Thomson Reuters consensus target of $39.96, and it implies about 1.6 times its estimated 2014 tangible book value and about 10.5 times its 2014 earnings estimate.

J.P. Morgan’s stock was down $1.08 to $47.93, and Wells Fargo shares were down $0.64 to $36.57, due to the market weakness on Monday. This leaves higher upside to the Stern Agee price targets.

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