Global financial services firm UBS downgraded Bank of America (BAC) stock to Neutral (the equivalent of Hold) from Buy this week because it thinks the bank stock has limited upside over the next 12 months. Still, analysts raised their price target on BAC to $40 from $39.
Bank of America has shown "strong deposit growth, a reawakened investment banking and markets business and the prospect for accelerated buybacks," UBS said in its report, but this is "now fairly reflected in market multiples" with the stock in the high-$30s.
"While we continue to view BAC as a high quality stock and a beneficiary from higher interest rates, the stock currently trades at 12 times our 2025 earnings per share estimate, which is in-line with our target multiple and above the company's 11 times 10-year average,” UBS said.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"As the market has shifted its stance towards expectations for a more gradual easing of interest rates (now expecting three cuts vs six in January), we think BAC's favorable asset sensitivity relative to peers has been reflected in the stock's performance and is now fully priced in," the analysts added.
The new price target of $40 by UBS implies an upside of about 8% from BAC's current stock price.
Bank of America is one of the world’s largest banks and the second-largest in the U.S. with total assets of more than $3 trillion and deposits of nearly $2 trillion.
CFRA is positive on bank earnings
CFRA Research analyst Kenneth Leon released a report ahead of first-quarter earnings for global U.S. banks, saying that they are "likely to see a sequential improvement in March versus December results, but year-over-year comparisons are likely to be flat to lower."
Leon notes that higher interest rates have benefitted net interest income of global U.S. banks and a "healthy U.S. economy" has been positive for loan volume growth.
The analyst concluded that JPMorgan Chase (JPM), Goldman Sachs (GS) and Morgan Stanley (MS) have the best chances to deliver better-than-expected results in the first quarter of 2024, but he's also positive on Citigroup (C) and Bank of America.
Q1 earnings season unofficially kicks off next Friday, April 12, with several big banks including JPMorgan reporting. Bank of America, meanwhile, hits the earnings calendar ahead of the April 16 open.
Analysts, on average, expect Bank of America to disclose first-quarter earnings of 71 cents per share, down 24.5% year-over-year. Revenue is forecast to fall 11% to $23.5 billion.
Related Content
-
Why Robinhood Stock Is Soaring After EarningsRobinhood stock is sizzling Thursday after the online trading platform reported impressive fourth-quarter results. Here's what investors need to know.
-
Trump's Tariffs on Metals to Slam Soda and Housing Prices in U.S.Tariffs The president announced 25% tariffs on aluminum and steel imports, which may impact your wallet.
-
Why Robinhood Stock Is Soaring After Earnings
Robinhood stock is sizzling Thursday after the online trading platform reported impressive fourth-quarter results. Here's what investors need to know.
-
Heirs Inheriting Crypto? Don't Make It a Headache for ThemIf you have cryptocurrency in your estate, you'll need meticulous plans and clear instructions to ensure beneficiaries don't lose out after you're gone.
-
DIY Retirement Planning: A Smart Move or a Risky Endeavor?You can cut the cost of retirement planning by doing it yourself. But for something this important, it might be wiser to call in the professionals.
-
Galentine's Day: A Time to Promote Financial Literacy Among FriendsHere are three things women can do to help their friends gain financial knowledge and confidence.
-
Stock Market Today: Markets Turn Lower on Nasty Inflation SurpriseEquities sold off after a hot reading on consumer price inflation pushed back rate cuts to autumn or year-end.
-
CPI Report Puts the Kibosh on Rate Cuts: What the Experts Are Saying About InflationCPI Consumer price inflation reared its ugly head to start the year, dashing hopes for the Fed to lower borrowing costs anytime soon.
-
These Two Issues Are Critical to Efficient Retirement PlanningYou're saving hard for retirement, but if you're not thinking ahead about taxes and the cost of health care, your savings — and your legacy — could be at risk.
-
How to Use Good Debt (While Identifying and Avoiding Bad Debt)Not all debt is bad, but knowing the difference between good debt and bad debt and how to use them can help you get ahead financially and stay ahead.
