While BAC remains 21% higher over the past six months, it has slid 3% in the past month. The company delivered strong earnings but underwhelmed in terms of its outlook due to weak loan demand and compression in the spread between short and long-term rates.
Can BAC bounce back after its recent slide? Let’s find out if this multinational investment bank and financial services specialist is worthy of your investing dollars at its current price.
BAC Points of Note
BAC has a forward P/E ratio of 11.41. This means the stock is fairly priced at around $38.63 per share or possibly even slightly underpriced. Back in the 90s, the talking heads on CNBC were adamant that a forward P/E ratio of 12 represented fair value. However, inflation combined with an emphasis on future earnings has caused most market analysts to reconsider their stance. Today, a forward P/E ratio of 15 or so constitutes fair value. It is also interesting not to note BAC has a beta of 1.54. This is a relatively low beta, meaning the stock is unlikely to make a significant move should the market soar or suffer a large drop.
Part of the reason why BAC has been sliding is the fact that the current environment is not optimal for lenders. Though the company surpassed estimates for second-quarter earnings, its revenue was somewhat disappointing. Furthermore, BAC has been struggling to make loans in the current lending environment. Thankfully, the silver lining is the company’s executives believe the worst might be behind us regarding interest spread and lending. However, faltering loan growth appears to be a major investor concern even though the company surpassed expectations of 77 cents per share in the second quarter, raking in earnings of $1.03 per share.
Though the lending market is certainly concerning, it is only a matter of time until small businesses and consumers begin piling on the debt as they did before the pandemic. Furthermore, once the Biden Bucks government cash payments directly to consumers end, there will be heightened demand for loans, helping BAC shore up this weak point all the more.
BAC POWR Ratings
BAC has a C POWR Ratings grade, indicating the stock is a Hold. BAC has Cs in the Value, Growth, Momentum, and Sentiment components of the POWR Ratings. Investors who are curious as to how BAC fares in the rest of the POWR Ratings components such as Quality and Stability can find out by clicking here.
Of the 11 publicly traded companies in the Money Center Banks category, BAC is ranked 9th. Click here to find out more about the publicly traded companies in this segment.
The Analysts’ Take on BAC
The analysts are bullish on BAC, setting an average target price of $43.67 per share. If BAC hits this level, it will have increased by more than 7%. The stock’s average analyst price target has jumped up to $11.29 in the past half-year. A total of 25 analysts have issued BAC recommendations. Exactly four analysts view BAC as a Strong Buy, 13 view it as a Buy, and eight view it as a Hold. No analysts consider BAC to be a Sell or Strong Sell.
To buy the Dip or not buy the dip, That is the Question?
BAC is unworthy of your hard-earned investing dollars at its current price point. Wait until BAC either decreases in price have a couple of positive news stories or provide another reason for investors to be enthusiastic about the stock. The bottom line is the market has plenty of better opportunities to put your money at work. Resist the temptation to invest in BAC and shift your focus to other opportunities.
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BAC shares fell $0.20 (-0.52%) in premarket trading Thursday. Year-to-date, BAC has gained 27.32%, versus a 16.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...
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