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JPMorgan: Investors Are Underestimating the Boost Mega IPOs Could Give Wall Street Banks
At a glance
- •JPMorgan issued a tactical buy on Goldman Sachs and Morgan Stanley ahead of their mid-July Q2 results, temporarily upgrading both to outperform.
- •Analysts raised 2026 adjusted EPS forecasts for Goldman Sachs by 5% and for Morgan Stanley by 2%, and lifted price targets to $900 and $187 respectively.
- •Stock trading revenues are forecast to rise ~21% year-over-year; FICC (fixed-income, commodities and currencies) revenues are expected to rise ~7%; total market revenues about +14%.
- •SpaceX and other mega IPOs create a multiplier effect, feeding underwriting fees and increased secondary-market trading that can materially lift banks' revenue pools.
- •U.S. investment banks trade at higher P/E multiples (upper teens) than some European peers (Barclays and Deutsche Bank in the mid-single digits), but JPMorgan argues U.S. banks have superior earnings momentum.
Market analysis
Analysts at JPMorgan Chase & Co. say investors are overlooking a potentially significant near-term earnings upside for big Wall Street investment banks as volatile markets and heavy new equity issuance pick up. In a tactical move designed to play a short-term rerating into second-quarter results, JPMorgans specialist sales team Rob Dwyer and Ayano Tsunoda has recommended buying shares of Goldman Sachs and Morgan Stanley and temporarily upgraded both to outperform ahead of quarterly numbers due mid-July.
Its important to stress these are tactical calls tied to the build-up to earnings. Goldman Sachs reports on July 15 and Morgan Stanley on July 16, and JPMorgans longer-term stance on both stocks remains neutral.
The banks team pointed to a strong start to 2026 for equities sales and trading: the first quarter was the best ever for investment banks on equity trading revenue. Building on that momentum, Dwyer and Tsunoda increased their 2026 adjusted earnings-per-share forecasts by 5% for Goldman Sachs and 2% for Morgan Stanley, and nudged up price targets to $900 from $826 for Goldman, and to $187 from $179 for Morgan Stanley.
At the time of the note, Goldman closed at $1,037 and Morgan Stanley at $213.
Why JPMorgan believes the upside is underappreciated
JPMorgan expects several revenue drivers to remain favorable in the second quarter. The analysts forecast stock trading revenues to rise about 21% year-over-year, fixed-income, commodities and currencies trading to climb roughly 7%, and overall market revenues to increase about 14%. Those gains reflect strong trading volumes across U.S. exchanges and heightened client activity.
Crucially, JPMorgan highlights the role of mega initial public offerings in particular the SpaceX listing and other large planned listings this year. As two of the lead banks advising on SpaceXs IPO, Goldman and Morgan Stanley stand to benefit from both upfront underwriting and the longer-run multiplier effect. That effect stems from IPOs and follow-on financings feeding secondary-market trading, hedging, and other fee-generating activity that is often hard for outside investors to quantify but can meaningfully expand the forward revenue pool.
The analysts describe that multiplier as a key driver of forward revenues that the market likely underestimates, particularly given strong equity market returns the MSCI World index is up about 10% year-to-date and an uptick in new issuance.
JPMorgan also points to geopolitical turbulence, notably hostilities in the Persian Gulf, which have increased volatility in commodity markets and lifted hedging demand. Both Goldman and Morgan Stanley are active in commodity and energy trading, and the uncertainty around pricing has generated meaningful increases in client hedging and market-making activity.
Across the sector, U.S. investment banks are not inexpensive: they trade on price-to-earnings multiples in the upper teens. European peers such as Barclays and Deutsche Bank trade at much lower multiples, in the mid-single digits, reflecting different regional dynamics and investor perceptions. JPMorgan argues, however, that U.S. players offer superior earnings momentum because of booming exchange volumes, expanding financing activity on their balance sheets and the secondary trading boost from large listings.
What to watch
Investors should watch second-quarter trading results from Goldman Sachs (reporting July 15) and Morgan Stanley (reporting July 16) for evidence that the trading momentum and IPO-related fee potential are translating into materially stronger results. JPMorgans tactical stance suggests analysts expect those prints to act as short-term share-price drivers.
Beyond individual quarterly results, the market will be watching the cadence and pricing of mega IPOs, how underwriting fees are allocated, and whether heightened secondary-market volumes persist after listings. Those factors will determine whether the uplift JPMorgan models for trading and investment banking revenues becomes durable.
For now, JPMorgans view is a reminder that big capital-markets events led by listings like SpaceX and other large offerings can ripple across banks trading and financing businesses in ways the broader market sometimes underappreciates.
