Is Bank of America Stock Still Worth the Investment?

BAC is slated to release earnings before the open on Wednesday, Jan. 19

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The senior leadership team at Bank of America Corporation (NYSE:BAC) is slated to release fourth-quarter and full-year financial results before the open on Wednesday, Jan. 19. Wall Street analysts anticipate that the financial institution will report earnings of $0.78 per share for its most recent quarter, compared to the EPS of $0.85 reported for its third quarter.

Bank of America stock is getting a boost today on price-target hikes from J.P. Morgan Securities and Piper Sandler, to $52.50 and $54, respectively. Plus, the company just appointed Alice Wong as its new managing director in its Americas Financial Institutions Investment Banking unit.

The security was last seen up 0.6% to trade at $47.48 for the day, and the stock boasts a year-over-year lead of 47.6%. A bull gap earlier this week has helped along the shares, while further down the 100-day moving average has kept some wind at the equity's back. Moreover, the company offers a forward dividend of $0.84 with a dividend yield of 1.78% to its shareholders.

bac jan 6

Analysts have been bullish on BAC, but there's still room for upgrades and/or price-target hikes. Of the 16 in coverage, five consider the stock a "hold" or worse, while the 12-month consensus price target of $50.13 is a slim 6% premium to current levels. 

Meanwhile, short-term options traders remain incredibly put-biased, and an unwinding of this pessimism could also give BAC a boost. The security sports a Schaeffer's put/call open interest ratio of 1.20, which stands higher than all other readings from the past year. 

From a fundamental point of view, Bank of America stock has a decent valuation, with a price-earnings ratio of 14.01. However, BAC lacks consistency with its top- and bottom-line growth, experiencing two consecutive years of declines in fiscal 2019 and fiscal 2020. Between fiscal 2018 and fiscal 2020, Bank of America’s revenues and net income decreased 6% and 38%, respectively. In addition, the financial institution is expected to report a 9.7% decrease in earnings in 2022.

Nonetheless, BAC remains secure with a balance sheet that includes $750 billion in cash and $565 billion in total debt. This makes it difficult to imagine Bank of America stock experiencing a significant drop in price over the coming years, despite its limited growth potential.

 




 
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