J.P. Morgan flags upside in beaten-down IPOs ERock and Wise

J.P. Morgan analysts have identified two recently listed equities, ERock and Wise, as undervalued opportunities despite recent market declines. The recommendation is framed within a broader view that investors should utilise geopolitical volatility to add to equity positions, with the expectation that oil prices, inflation, and bond yields will reverse their recent upward trends.

ERock, which provides modular natural gas power solutions for data centres, has fallen 42% since its June 10 initial public offering. J.P. Morgan rates the stock as 'Overweight' with a $24 price target, citing structural demand for 'bridge power' solutions. The bank argues that the company is well positioned to benefit from the need for scalable energy infrastructure independent of regular power grids, particularly as electricity demand rises.

Wise, a fintech firm specialising in cross-border payments, has dropped 18% following regulatory scrutiny in Belgium regarding potential money laundering. J.P. Morgan maintains an 'Overweight' rating on Wise with a $17.50 target, arguing that underlying business growth remains robust despite compliance challenges. The bank believes the market will re-rate the company as it evolves into a financial services infrastructure provider.

The broader market context provided by J.P. Morgan suggests that while geopolitical tensions have added volatility, the S&P 500 remains near all-time highs. Analysts believe that as the impact of adverse headlines is priced out, key economic indicators could reverse their Q2 upmoves, creating a favourable environment for equities that have been unfairly penalised by short-term fears.

Other Wall Street analysts share a generally positive outlook on both stocks. ERock holds a 'Strong Buy' consensus with an average price target of $22.63, implying 109% upside, while Wise has a 'Moderate Buy' consensus with an average target of $16.04, suggesting 27% upside over the next 12 months.