JPMorgan says investors are overlooking the upside to Wall Street banks that comes from SpaceX and other mega IPOs

By Jules Rimmer

Results next month for both banks should be share-price drivers

Markets are overlooking the potential upside boost to earnings prospects for investment banks that volatile markets and heavy new equity issuance may provide in the coming months.

That's according to analysts at JPMorgan Chase & Co., who recommended investors buy Goldman Sachs (GS) and Morgan Stanley (MS) shares for a short-term move ahead of strong quarterly numbers expected next month. They also temporarily upgraded their trading recommendation on both banks to outperform.

It should be emphasized that these calls from JPMorgan are tactical, short-term calls running up to the release of second-quarter results on July 15 for Goldman Sachs and July 16 for Morgan Stanley. The official recommendation on both stocks remains neutral.

The first quarter of 2026 was the best ever for investment banks in terms of earnings derived from equities sales and trading, and JPMorgan's specialist sales team of Rob Dwyer and Ayano Tsunoda see that trend trend continuing into the second three months of the year.

For 2026, they increased their adjusted earnings per share forecasts for Goldman Sachs and Morgan Stanley by 5% and 2%, respectively. They also upped their price targets from $826 to $900 for Goldman and from $179 to $187 for Morgan Stanley.

Goldman closed Thursday at $1037 and Morgan Stanley ended the session at $213.

Global ECM: Monthly Revenue in $ million

Dwyer and Tsunoda forecast trading revenues from stocks to rise 21% year-over-year, from fixed-income, commodities and currencies +7% and overall market revenues 14%. Most importantly, though, as two of the lead banks advising on the SpaceX IPO (SPCX), Goldman and Morgan Stanley might expect a tailwind from investment banking fees.

Giant listings also scheduled later in the year are creating "a multiplier effect from IPOs and financing deals into secondary trading and associated activities, a key driver of the forward revenue pool that is difficult to quantify externally and likely underestimated by the market in our view," said the pair.

That's as equity market returns have generally been strong, with the MSCI World index up 10% thus far.

Looking across the sector, and including European investment banks in the comparison, the U.S. investment banks are not cheap. They trade on price-to- earnings multiples in the upper teens while the likes of Barclays (UK:BARC) and Deutsche Bank (XE:DBK) only command multiples in the mid-single digits.

However, as the JPMorgan note points out, the U.S. players offer superior earnings momentum given the booming volumes on its exchanges, their balance sheets are growing in terms of financing and the multiplier effect from IPOs into financing and secondary trading is powerful.

Global ECM Revenue League Table: 2026* in $ million

Moreover, hostilities in the Persian Gulf have generated huge turbulence in commodity markets and both Morgan Stanley and Goldman Sachs are extremely active here. The uncertainty around pricing, for example, has led to a meaningful increase in hedging activity.

-Jules Rimmer

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

06-12-26 0714ET