Business World

An analyst warned investors Thursday to "be cautious" of JPMorgan Chase & Co. in the current economic slump, though he noted the national bank has done the country a "major service" by buying Bear Stearns Cos.

Punk, Ziegel & Co. analyst Richard Bove said a post-earnings rally of JPMorgan Chase shares - in which the stock shot up nearly 7% despite a 50% drop in first-quarter profit - makes little sense.

Even though the results beat Wall Street’s expectations, the numbers miss that mark if one-time benefits are excluded, he said.

Investors may be happy JPMorgan did not post a large write-down, he said, or be reacting to the Bear Stearns buyout - which some feel may boost earnings by $1 billion.

The Bear Stearns deal, though, likely will detract from profit for "some time" and the investment bank "has very little to add" to JPMorgan (JPM, Fortune 500), which does not need another New York City building, he said.

Beyond any sense of hope that may have sent shares up, operating numbers from the investment unit, the retail financial services unit and the card services unit were discouraging, he said.

"My analysis at the moment is that this company is having a great deal of difficulty dealing with the current economic downturn faxless payday loans. Be cautious," Bove said in a note to clients.

Bove kept a "Market Perform" rating and $44 price target, implying he expects shares to dip about 2% from Wednesday’s $44.96 close.

Despite the wary tone, Bove said he is a "fan" of JPMorgan Chief Executive and Chairman Jamie Dimon.

"I believe that he has done his country a major service by buying Bear Stearns," Bove said. "Moreover, I believe that JPMorgan is a great company with a very attractive long term future."

The Bear Stearns (BSC, Fortune 500) buyout was seen by many as a positive to prevent further hemorrhaging in the credit markets. 

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