Big Year for Banks as Bank of America Securities Upgrades JPMorgan Chase (NYSE:JPM)

2020 was not a great year for a lot of things. Retail, live music, restaurants, theme parks, and most of life itself wasn't exactly positive during that time. Banks also tended to flag a bit as they're often behind the 8-ball on digital adoption. That wasn't a place to be as governments forced anything in-person to shut down for a large stretch of time. However, new reports are looking to 2021 to be a much better year for banks, and Bank of America Securities has already put out an upgrade for JPMorgan Chase (NYSE:JPM) accordingly.

A Much Better Year for Banks

In stepping up the rating from “neutral” to “buy”, not to mention hiking the price target from $131 to $160, Bank of America Securities—via analyst Erika Najarian—noted that JPMorgan Chase is in a good position to benefit from several key measures that are likely to come into play.

One, consumer spending is likely to get at least something of an uptick this year. Last year, we spent almost two months in nigh-complete lockdown throughout the country. Full-scale locking down is less likely this time around since vaccines are moving out and we understand much more about the disease than we once did. Even in high-lockdown places like Michigan, many segments aren't subject to the lockdowns as they once were.

Two, with another round of stimulus checks likely to hit consumer pockets, that should lend at least a little tailwind to the overall economy. The exact scope of that tailwind is readily debatable, but the notion that some tailwind will exist is hard to deny.

Three, there's the issue of interest rates. They're still very low, and not likely to hike up any time soon. We've already seen companies starting to work on stock buyback plans, and such measures are likely to continue as time goes by.

Joining the Choir

Our latest research, meanwhile, suggests that Najarian—and by extension Bank of America Securities—is scarcely alone in the assessment of JPMorgan Chase. The company has enjoyed a consensus “buy” rating for the last six months, and there hasn't even been a lot of variance in the ratios. Six months ago, the company had nine “hold” ratings and 13 “buy” ratings. There were neither “sell” nor “strong buy” to be seen. Today, there are two “sell” ratings, six “hold” and 18 “buy.” Not only have new analysts stepped into the field, but they've also stepped in very strongly on the “buy” side.

The price target, meanwhile, dipped a bit between six months ago and three, but has been gaining back ever since, though not by any large amounts. It's gone from $111.99 six months ago to $111.32 three months ago. It gained slightly to $112.09 a month ago, and now sits at its biggest gain of all, $119.99 today. Given that the stock is trading at $136.21 as of this writing, it's clear the price targets could stand some adjustment.

Not Quite Like Going Out on a Limb

The notions expressed by Bank of America Securities seem valid. The logic is sound enough, even if possibilities exist of it being wrong. A new lockdown under President Biden could take place, and some reports suggest that it will, which would pull a lot of teeth from Bank of America's projections. However, with Jefferies Financial Group also stepping up from “hold” to “buy” just today, it's clear that analysts are looking for bank stocks to turn around this year.

The odd part about JPMorgan Chase, however, is that it recently dissolved a healthcare-related partnership effort between itself, Berkshire Hathaway and Amazon. Known as “Haven”, the joint venture started off 2018 as a big deal, but quietly ground to a halt three years later. Reports suggest that the companies will take the data the project produced and put it to work within their own operations, collaborating only on an “informal” basis. Why depart a healthcare operation in the midst of perhaps one of the greatest healthcare bull markets ever seen?

Perhaps JPMorgan Chase knows that that healthcare bull market, produced mainly by the coronavirus, is coming to an end. If that's the case, departing healthcare operations to refocus on banking could be a good plan after all. If there's less demand for healthcare in 2021, that will likely also see accompanying demand for non-healthcare products and services that are suddenly available again on a wider scope. That would indeed make for a better year for banks, as projected, and make getting in on JPMorgan Chase not a particularly bad idea.