3 Bank Stocks Blasted By Berenberg

GS, JPM, and WFC are the brokerage firm's preferred shorts

Feb 23, 2018 at 9:58 AM
facebook twitter linkedin


Berenberg weighed in on banks today, saying several large-cap financial shares are overvalued. The brokerage firm specifically called out Goldman Sachs Group Inc (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo & Co (NYSE:WFC) as the best stocks to short, considering "structural headwinds far outweigh" strong first-quarter revenue numbers, and that "downgrades will recommence as the rate cycle matures." Nevertheless, all three stocks saw their price targets hiked at Berenberg, on positive near-term expectations from rate hikes.

Goldman Sachs Bulls Buy Front-Month Calls

Goldman Sachs stock had its price target lifted to $200 from $190 -- though this remains well below last night's close at $261.43, as well as the average 12-month price target of $268.71. Out of the gate, GS shares are up 1% to trade at $264, and are on track to snap their four-day losing streak.

Options traders are optimistic about the bank stock's short-term trajectory. The March 280 and 300 calls are home to peak open interest of 7,711 and 5,396 contracts, respectively. Data from the major options exchanges confirms mostly buy-to-open activity at each front-month strike, suggesting speculators are betting on a breakout to record highs by expiration at the close on Friday, March 16. The highest GS stock has ever traded is $273.75, hit on Jan. 29.

JPMorgan Chase Stock Overdue for Upgrades

Berenberg raised its price target for JPMorgan Chase stock to by $20 to $85. The last time JPM shares traded near $85 was in early June, and since then, they've shot more than 36% higher to $115.69, and tagged an all-time peak of $117.44 on Wednesday.

Most analysts remain skeptical of the security, though. While 10 of 20 analysts maintain a lukewarm "hold" recommendation on JPM stock, the consensus 12-month price target of $120.07 stands at a slim 4.4% premium to current trading levels. Should the shares continue to move higher, a round of bullish brokerage notes could draw more buyers to the table.

Wells Fargo Options Traders Eye Record Highs

Wells Fargo stock's price target was raised to $45 from $35 at Berenberg, though the brokerage firm said it liked this bank the least and Citigroup (C) the most. Regardless, WFC shares are trading up 0.4% at $59.06, extending a mid-February bounce off their 200-day moving average. However, this recent rally has been contained by the round $60 mark, which coincides with an early February bear gap -- brought on by stiff regulatory restrictions following the bank's fake account scandal.

This near-term barrier hasn't stopped options traders from betting bullishly on the stock. WFC's weekly 3/9 66.50-strike call has seen one of the biggest increases in open interest over the past two weeks, with more than 10,047 contracts initiated. Trade-Alert indicates a number of these calls were bought to open on Monday, as traders eye a move to uncharted territory in the next two weeks. Wells Fargo stock hit a record high of $66.31 on Jan. 29.

 

If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Schaeffer's Investment Research Stock Pick Report
 


 


 
Special Offers from Schaeffer's Trading Partners