On Thursday, JPMorgan (NYSE:JPM) updated its stance on HSBC Holdings Plc (LON:HSBA) (5:HK) (NYSE:HSBC) shares, increasing the price target to HK$83.00 from the previous HK$78.00, while maintaining an Overweight rating on the stock.
This revision comes after assessing HSBC's first-quarter results, which prompted the firm to adjust its earnings per share (EPS) estimates upward by 4-5% for the fiscal years 2024 to 2026. The adjustments are attributed to anticipated higher revenues and a reduced share count, despite expectations of increased costs.
JPMorgan's analysis suggests that HSBC's Banking Net Interest Income (NII) will reach $43.1 billion, surpassing the management's own guidance of more than $41 billion. This forecast is based on average U.S. interest rates of 5%, 4.25%, and 4% for the fiscal years 2024 through 2026, respectively. The firm's outlook reflects confidence in HSBC's financial performance in the face of evolving economic conditions.
In addition to the revised earnings forecast, JPMorgan also increased its projection for HSBC's share buybacks. The firm now expects HSBC to undertake an $11 billion share buyback program in the fiscal year 2024, up from the previously forecasted $10.5 billion. Moreover, analysts anticipate an announcement of $3 billion in share buybacks alongside the second-quarter results.
The Overweight rating is supported by HSBC's current trading position, which JPMorgan notes is at 0.9 times the price-to-book (P/B) ratio for an expected normalized return on equity (ROE) of 13.2% in the fiscal year 2024. This valuation suggests that the bank's stock is favorably priced given the projected earnings and return metrics.
InvestingPro Insights
As investors digest the latest analysis from JPMorgan on HSBC Holdings (NYSE:HSBC) Plc, real-time data and insights from InvestingPro can provide additional context. With a current Market Cap of $164.79 billion and a P/E Ratio sitting at 7.64, HSBC presents an interesting valuation perspective. Notably, the stock is trading at a low earnings multiple, which aligns with JPMorgan's assessment of the stock being favorably priced. The P/E Ratio has adjusted slightly higher in the last twelve months as of Q1 2024, to 8.35, indicating a shift in market sentiment or financial performance.
InvestingPro Tips highlight that HSBC has raised its dividend for 4 consecutive years, which may appeal to income-focused investors, especially considering the significant Dividend Yield of 15.29%. This is a substantial figure that could attract those looking for steady income streams, especially when coupled with the fact that HSBC is a prominent player in the Banks industry. Additionally, the stock is trading near its 52-week high, with a Price % of 52 Week High of 98.69%, reflecting strong market confidence and aligning with the positive momentum indicated by JPMorgan's Overweight rating.
For investors seeking a deeper dive into HSBC's financials and market performance, there are many more InvestingPro Tips available, including insights into earnings revisions, profitability predictions, and return metrics. To access these valuable tips and make the most informed investment decisions, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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