Space Exploration Tech IPO Frenzy: JPMorgan Says Wall Street Investment Banking May Be Undervalued

JPMorgan believes that the market has underestimated the boost to investment banking performance from mega IPOs like Space Exploration Tech, and has issued a short-term tactical buy signal accordingly.

Rob Dwyer and Ayano Tsunoda from the bank's specialized sales team pointed out that a more volatile market environment and intensive new stock issuances are expected to bring substantial revenue growth to investment banks, but this upside potential has not been fully priced in by the market. The two have temporarily upgraded the trading ratings for Goldman Sachs and Morgan Stanley to "Outperform."

Goldman Sachs is scheduled to release its quarterly report on July 15, and Morgan Stanley on July 16. JPMorgan expects both banks to deliver strong results. Notably, this adjustment is a short-term tactical move, and the formal ratings for both stocks remain "Neutral."

Mega IPOs Create a "Multiplier Effect"

JPMorgan analysts pointed out that as the two lead underwriters for the Space Exploration Tech IPO, Goldman Sachs and Morgan Stanley will directly benefit from investment banking underwriting fee income.

More importantly, large listing projects landing successively throughout the year are generating a "multiplier effect"—the activity in IPOs and financing transactions will drive linked growth in secondary market trading and related businesses. Dwyer and Tsunoda stated that this effect is "a key driver pushing the future revenue pool, difficult to quantify precisely from the outside, and may be underestimated by the market."

Currently, the MSCI World Index has risen by approximately 10% year-to-date, with strong equity market returns providing a favorable environment for new stock issuances.

Valuations Are Not Cheap, But Growth Momentum Is Superior

From a performance driver perspective, the first quarter of 2026 was already the best quarter ever for investment banking equity sales and trading businesses, and JPMorgan believes this momentum will continue into the second quarter. Dwyer and Tsunoda predict that equity trading revenue will grow by 21% year-over-year, FICC trading revenue by 7%, and overall markets business revenue by 14%.

In addition, the situation in the Middle East has triggered severe volatility in commodity markets. With Goldman Sachs and Morgan Stanley deeply involved in related businesses, rising price uncertainty has driven a significant increase in hedging demand, further supporting the trading businesses of both banks.

In a horizontal comparison, US investment bank valuations are not cheap. The price-to-earnings ratios of Goldman Sachs and Morgan Stanley are currently in the higher range of the teens, while those of European peers such as Barclays and Deutsche Bank are only in the mid-single digits.

However, JPMorgan pointed out that US investment banks possess superior earnings growth momentum thanks to booming trading volumes on domestic exchanges; their balance sheets continue to expand on the financing business side, coupled with the multiplier effect of IPOs transmitting to financing and secondary trading, resulting in clear comprehensive competitive advantages.

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