Can JPMorgan Continue Its Impressive Rally?

JPMorgan has risen from the financial crisis as arguably the strongest megabank. Under the leadership of polarizing CEO Jamie Dimon, the company emerged from the financial crisis far less damaged than its peers. Although the bank has regained stability in the aftermath of the crisis, events like the “London Whale” trading debacle call into question whether the bank has completely eliminated risky banking practices from its operations. Let’s use our CHEAT SHEET investing framework to decide whether JPMorgan is an OUTPERFORM, WAIT AND SEE, or STAY AWAY.

C = Catalysts for the Stock’s Movement

JPMorgan’s stock has climbed significantly in the past year — its uptrend mostly fueled by renewed confidence in the economy and three straight quarters of year-over-year earnings growth. JPMorgan is expected to announce its pivotal second quarter earnings this Friday. These results will most likely make or break JPMorgan’s yearlong uptrend.

A strong equities market, including a rebirth of IPOs this year, will bolster profits in JPMorgan’s investment banking division, which makes up around 30 percent of its revenues. Mortgage originations, which increased 57 percent year-over-year last quarter, should stay healthy for at least the next two quarters, as new home sales continue to rise. Even with the new Dodd-Frank regulations and the one year anniversary of the “London Fiasco” incident, JPMorgan should be able to exceed analysts’ estimates because of a more attractive equities and real estate market, in addition to its success in reducing expenses over the past few quarters.