SpaceX sparks IPO frenzy, JPMorgan: Wall Street investment banking business may be undervalued

``` J.P. Morgan believes that the market has underestimated the boost to investment banking performance from giant IPOs such as SpaceX, and has accordingly issued a short-term tactical buy signal. Rob Dwyer and Ayano Tsunoda from the bank's dedicated sales team pointed out that heightened market volatility and a flurry of new listings are likely to bring significant profit growth for investment banks. However, this upside has yet to be fully priced by the market. The two have temporarily upgraded trading ratings for Goldman Sachs and Morgan Stanley to “outperform”. Goldman Sachs is scheduled to release its quarterly report on July 15, with Morgan Stanley following on July 16. J.P. Morgan expects both banks to deliver strong results. It is worth noting that this adjustment is a short-term tactical move, and the official ratings for both stocks remain “neutral”. Super IPOs Create a “Multiplier Effect” J.P. Morgan analysts point out that as the two lead underwriters for the SpaceX IPO, Goldman Sachs and Morgan Stanley will directly benefit from investment banking underwriting fees. More importantly, major IPOs launching throughout the year are generating a “multiplier effect” — active IPO and financing transactions are driving increased activity in secondary market trading and related businesses. Dwyer and Tsunoda stated that this effect “is a key driver for future revenue pools, difficult for outsiders to quantify precisely, and may be underestimated by the market.” Currently, the MSCI World Index has risen about 10% year-to-date, and strong stock market returns have created a favorable environment for new listings. Valuations Not Cheap, But Growth Momentum is Stronger From a performance perspective, the first quarter of 2026 has already been the best-ever quarter for investment banks’ equities sales and trading businesses, and J.P. Morgan believes this momentum will continue into the second quarter. Dwyer and Tsunoda predict that equities trading revenue will grow 21% year-on-year, FICC trading revenue will grow 7%, and total markets business revenue will grow 14%. In addition, turmoil in the Middle East has caused significant volatility in commodity markets. Goldman Sachs and Morgan Stanley are deeply involved in related businesses, and rising price uncertainty has significantly increased hedging demand, further supporting the trading businesses of both banks. By comparison, U.S. investment banks aren’t cheap in terms of valuation. Currently, Goldman Sachs and Morgan Stanley’s P/E ratios are in the teens, which is relatively high, while European peers such as Barclays and Deutsche Bank trade at mid-single-digit P/Es. However, J.P. Morgan pointed out that U.S. investment banks, with robust trading volumes on domestic exchanges, possess superior profit growth momentum; their balance sheets continue to expand on the financing side, and coupled with the multiplier effect from IPOs spilling into financing and secondary trading, their comprehensive competitive advantages are clear. Risk Disclosure and Disclaimer The market comes with risks, and investments require caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation, or needs of any individual user. Users should consider whether any opinions, views, or conclusions in this article are suitable to their particular situation. Investing accordingly is at your own risk. ```