JPMorgan believes the market has underestimated the boosting effect of mega IPOs such as SpaceX on investment banking performance, and has issued a short-term tactical buy signal.
The bank noted that super IPOs are generating a “multiplier effect”, driving linked growth in secondary market trading and related business, with this incremental revenue not yet fully priced in. As the lead underwriters, Goldman Sachs and Morgan Stanley will directly benefit from underwriting fees and derivative trading demand, with strong quarterly results expected.
JPMorgan believes the market has underestimated the uplifting effect of mega IPOs such as SpaceX on investment banking results, and has accordingly issued a short-term tactical buy signal.
The bank’s dedicated sales team, Rob Dwyer and Ayano Tsunoda, pointed out that a volatile market environment combined with a dense pipeline of new issuances is likely to generate substantial revenue growth for investment banks, yet this upside has not been fully priced in by the market. The duo has temporarily upgraded their trading ratings for Goldman Sachs and Morgan Stanley to “Overweight”.
Goldman Sachs is scheduled to release its quarterly results on July 15, and Morgan Stanley on July 16. JPMorgan anticipates that both banks will deliver strong earnings. It is noteworthy that this adjustment is a short-term tactical move, as the official ratings for both stocks remain “Neutral”.
Super IPOs Create a “Multiplier Effect”
JPMorgan analysts indicated that Goldman Sachs and Morgan Stanley, as the two lead underwriters for the SpaceX IPO, will directly benefit from investment banking underwriting fee income.
More importantly, the large-scale listing projects materializing sequentially throughout the year are generating a “multiplier effect” — the surge in IPO and financing activities will drive linked growth in secondary market trading and related businesses. Dwyer and Tsunoda stated that this effect “is a key driver of the future revenue pool, difficult to quantify precisely from the outside, and the market may be underestimating it.”
Currently, the MSCI World Index has accumulated a gain of approximately 10% year-to-date, with robust stock market returns providing a favorable environment for new share issuances.
Valuations Are Not Cheap, but Growth Momentum Is Stronger
From a performance driver perspective, the first quarter of 2026 was already the best quarter on record for investment banking equity sales and trading. JPMorgan believes this momentum will continue into the second quarter. Dwyer and Tsunoda forecast equity trading revenue to grow by 21% year-over-year, FICC trading revenue by 7%, and overall market business revenue by 14%.
Furthermore, geopolitical tensions in the Middle East have led to sharp volatility in commodity markets. Goldman Sachs and Morgan Stanley have deep involvement in related business, and the rise in price uncertainty has significantly increased hedging demand, further supporting the trading operations of both banks.
From a horizontal comparison perspective, valuations of U.S. investment banks are not inexpensive. Goldman Sachs and Morgan Stanley currently trade at a relatively high price-to-earnings (P/E) ratio in the range of teens, while European counterparts such as Barclays and Deutsche Bank have single-digit mid-range P/E ratios.
However, JPMorgan points out that U.S. investment banks, supported by robust trading volumes on domestic exchanges, possess stronger earnings growth momentum. Their balance sheets continue to expand in financing businesses, coupled with the multiplier effect from IPOs transmitting into financing and secondary trading, resulting in clear comprehensive competitive advantages.
