HomeMost PopularTech StocksFinancial Experts Advise Investing in JPMorgan Chase & Co. (JPM): Important Considerations

Financial Experts Advise Investing in JPMorgan Chase & Co. (JPM): Important Considerations

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Investors often rely on the recommendations of Wall Street analysts to make decisions about buying, selling, or holding a stock. Changes in these analysts’ ratings can have an impact on a stock’s price. But do these recommendations really matter?

Before we discuss the reliability and usefulness of brokerage recommendations, let’s see what experts have to say about JPMorgan Chase & Co. (JPM).

JPMorgan Chase & Co. currently has an average brokerage recommendation (ABR) of 1.77, based on the ratings of 20 brokerage firms. ABR is measured on a scale of 1 to 5, where 1.77 falls between “Strong Buy” and “Buy.” Out of the 20 recommendations, 11 are classified as “Strong Buy” and two as “Buy.” This means that 55% of the recommendations suggest “Strong Buy” and 10% recommend “Buy.”

Trends in Brokerage Recommendations for JPM

Broker Rating Breakdown Chart for JPM

Click here to check JPMorgan Chase & Co.’s price target and stock forecast >>>

While the ABR suggests buying JPMorgan Chase & Co., it’s important to note that relying solely on this information may not be wise. Studies have shown that brokerage recommendations have limited success in predicting stocks with the highest potential for price appreciation.

Why is this the case? Analysts employed by brokerage firms often have a positive bias towards stocks they cover due to their firms’ vested interests. Research indicates that for every “Strong Sell” recommendation, analysts assign five “Strong Buy” recommendations. This misalignment of interests makes it difficult to determine a stock’s future price movement based solely on brokerage recommendations. It’s best to use this information to validate your own analysis or rely on proven tools for predicting stock price movements.

One such tool is the Zacks Rank, a proprietary stock rating system with a track record that has been externally audited. It categorizes stocks into five ranks, from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell). The Zacks Rank is based on earnings estimate revisions and has shown a strong correlation with near-term stock price movements.

ABR vs. Zacks Rank: Understanding the Difference

Although both ABR and Zacks Rank are rated on a scale from 1 to 5, they are fundamentally different measures. ABR is calculated solely based on brokerage recommendations and is typically displayed with decimals (e.g., 1.28). On the other hand, the Zacks Rank is a quantitative model that incorporates earnings estimate revisions and is displayed as whole numbers (1 to 5).

Analysts employed by brokerage firms tend to be overly optimistic in their recommendations due to the interests of their employers. In contrast, the Zacks Rank is driven by earnings estimate revisions, which have been shown to strongly correlate with stock price movements.

Another key difference between ABR and Zacks Rank is freshness. ABR may not always be up-to-date, while the Zacks Rank reflects analysts’ latest earnings estimate revisions, making it timely in predicting future stock prices.

Is JPM a Good Investment?

For JPMorgan Chase & Co., the Zacks Consensus Estimate for the current year’s earnings has increased by 0.1% over the past month to $15.81. Analysts’ optimism about the company’s earnings prospects, indicated by their strong agreement in revising EPS estimates higher, could be a valid reason for the stock to perform well in the near future.

Based on the recent change in consensus estimate and other factors related to earnings estimates, JPMorgan Chase & Co. has received a Zacks Rank #1 (Strong Buy). You can find the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here >>>>

In summary, the Buy-equivalent ABR for JPMorgan Chase & Co. can be a useful guide for investors.

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JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report

Click here to read this article on Zacks.com.

Zacks Investment Research

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

Source: Nasdaq.com

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