By Rebecca Ungarino

JPMorgan Chase shares slipped as an analyst recommended that clients sell the stock because it appears too expensive after a run-up to record highs.

David George, an analyst at Baird, wrote in a report that although the bank is "best-in-class" with "scale, skill, and dominant market share" across its businesses, the balance between risks and potential rewards is "unattractive here and [we] urge investors to take profits."

Shares of JPMorgan hit a record high on Wednesday as part of a significant sector-wide rally that boosted large and regional banks, private-equity firms, and payments companies.

Investors were encouraged by the prospect of a friendlier regulatory posture toward Wall Street under a second Trump presidency, sending large financial exchange-traded funds soaring. JPMorgan's stock rose 11.5% on Wednesday for its largest percentage increase since November 2020. The stock fell 2% on Thursday morning as the S&P 500 rose 0.3%.

Baird now sees "limited upside in the stock," though he said he understands "the optimism market participants have around a more benign regulatory environment, along with a more pro-growth macroeconomic agenda."

George cited factors including that JPMorgan trades at around 2.6 times its tangible book value -- a measure of a company's worth that excludes goodwill -- and over 14 times the per-share earnings expected for 2026. He also cautioned investors that JPMorgan has said in recent quarters that it wouldn't buy back its stock at current prices.

"To make it really clear: We're not going to buy back a lot of stock at these prices," Jamie Dimon, JPMorgan's outspoken chief executive, said during an investor day presentation in May. "We do not consider stock buyback returning cash to shareholders. That's giving cash to exiting shareholders. We want to help the existing shareholders."

Despite "potential capital relief from an improving regulatory environment, management's appetite for buybacks may not align with lofty market expectations," George wrote in his report on Wednesday.

Write to Rebecca Ungarino at rebecca.ungarino@barrons.com

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November 07, 2024 09:46 ET (14:46 GMT)

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