This article first appeared on GuruFocus.
JPMorgan Chase (NYSE:JPM), America's largest bank by assets, dropped roughly 1.7% to $357.09 Wednesday as Treasury yields finally cracked after their brutal run higher. The 30-year yield had just hit its highest level since 2007 before retreating as the Treasury moved to expand liquidity-support buybacks. That reversal took some heat out of the rate trade and put banks on the back foot, even as the broader market recovered.
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But JPMorgan's business is doing anything but cooling. Second-quarter results delivered $21.2 billion of reported net income, or $7.70 per share, while profit excluding significant items hit $16.9 billion. And the real punch came from Wall Street. Investment-banking fees jumped 30%. Equity-markets revenue ripped 86% higher. Total markets revenue climbed 35%. JPMorgan does not need one perfect rate environment when this many profit engines are firing at once.
The bigger question is price. At $357.09, JPMorgan sits 13.95% above its GF Value estimate of $313.38. That is a meaningful premium, and after the stock's monster run, investors are clearly paying up for execution. Wednesday's decline looks more like the market trimming that premium than suddenly questioning the franchise. The business remains powerful. The earnings remain huge. But at nearly 14% above GF Value, JPMorgan now has to keep delivering numbers big enough to justify the price.