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Why JPMorgan Stock Will Continue to Perform Well in 2019

- By Jacob Maslow

JPMorgan Chase & Co. (JPM), a financial institute, will be hosting its fourth-quarter, full-year earnings call for 2018 on Jan. 15. The results will be released before the opening bell and will be quickly followed by a conference call to review the company's earnings.

Ahead of the call, the company's stock was downgraded this week by Jefferies analyst Ken Usdin.

Usdin cited the possibility that the company will miss revenue forecasts as fewer interest rate increases from the Fed are expected this year. Lower fees in mortgage, asset management and trading and investment are also possible, pushing the company's rating from "buy" to "hold."

The company's stock is expected to continue to perform well, with Jefferies putting a price target on the company at $110 a share. While this figure has been downgraded from $130, the stock would still rise at a rate of 10%, after starting the year at $99.31 a share.

If the company's revenue falls short of expectations in the most recent quarter, a slight drop in stock value mid-month would be expected before the stock rises again. JPMorgan fared well in 2018, and was even able to withstand major market selloffs in December.

The Financial Select Sector SPDR fell 14% over the last 12-month period, while JPMorgan stock fell just 7% during this span. JPMorgan performed well based on the overall market's performance last year, and that trend is expected to continue in 2019.

The company will have to adjust for fewer rate hikes and potential fluctuations in fees, but we should start to have a better picture of the Fed's rate hike increase potential after the first quarter of the year.

JPMorgan's own forecast predicts a slowing economy this year that will see unemployment continue to fall and an inflation rate that is contained. The company's predictions include limited expansion and equity returns on earnings as the main driver of the overall market in 2019. Earnings growth is also set to slow in overall markets, which will cause volatility.

Net revenue fell from $28.3 billion in the second quarter of 2018 to $27.8 billion in the third quarter. But net income remained strong, rising from $8.31 billion in the second quarter to $8.38 billion in the third quarter, and up from $6.73 billion a year prior.

A rise in net income of 24% year-over-year was reported. The company's credit segment remains strong, providing $174 billion to consumers and $16 billion to small businesses. Overall, JPMorgan's portfolio remains strong and should perform better than the overall financial market in the coming year.

Disclosure: The author does not have any stake in the listed equities.

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This article first appeared on GuruFocus.