Setting the Summer Scene for Bank Stocks

There could be seasonal headwinds on the horizon for financial names

Editor-in-Chief
Apr 23, 2021 at 12:07 PM
    facebook X logo linkedin


    Just like Black Friday signals the start of the holiday shopping season, when you see financial giants in the news for their corporate reports, you know earnings season is nigh. It feels like bank stocks are under the microscope even more this time around, amid the rise of the 10-year Treasury yield, subsequent inflationary concerns, Bitcoin's ubiquity, and the (hopefully) final throes of the coronavirus pandemic.

    This week, Bank of America's (BAC) top-line beat prompted six price-target hikes from the brokerage bunch. Goldman Sach's (GS) earnings and revenue beat resulted in eight post-earnings price-target adjustments higher. After the dust settled, BAC's consensus 12-month price target is an 8.1% premium to Friday's closing perch, while GS' average 12-month price target is a 11.2% premium.

    Earlier in the week, Wells Fargo (WFC) stock pulled back to a historically bullish trendline. Sure enough, WFC scored a post-earnings pop of 5.5%, no doubt fueled by the 11 price-target hikes. As the week comes to an end, WFC's analyst setup looks similar to its sector peers; its consensus 12-month price target is now a 10% premium to its current perch.

    COTW Bank Analysts

    Those were the winners, but not every financial name was as lucky. Charles Schwab (SCHW) suffered a post-earnings dip of 3.9% despite its own top-line beat and two ensuing price-target hikes. That brought SCHW's 12-month average price target up to a 17% premium to its most recent perch.

    All of this is a long-winded way of saying many financial names have their optimism already baked in. It's not just price-target; the majority of analysts rate BAC, GS, WFC, and SCHW at a "buy" or better, so don't expect a shift in analyst sentiment to serve as a contrarian tailwind going forward.

    Two more notes to consider as more bank earnings trickle in. First, keep an eye on Bitcoin and cryptocurrencies, as the direct listing of Coinbase Global (COIN) on the Nasdaq – the first listing the Nasdaq has ever sponsored -- captured investor attention last week as one of the biggest listings in the last decade. It's a paradigm shift for decentralized finance, or "defi," as it continues to burrow into the mainstream. Keeping a finger on the pulse of how this shifts the tectonic plates of traditional financial institutions will be important for investors.

    Lastly, there could be seasonal headwinds on the horizon for financial names. Per Schaeffer's Senior Quantitative Analyst Rocky White, with an assist from Schaeffer's Senior Market Strategist Chris Prybal, summer isn't the best time for bank stocks. Looking at equity returns from May 1 to August 31 going back to 2010, all of the bank names just mentioned – plus JPMorgan Chase (JPM) for good measure – sport uninspiring returns.

    COTW Bank Summer

    Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, April 18.

     

    Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

    This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

    On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

    Start targeting gains like the ones our subscribers have seen recently, including:

    213.3% GAIN on AutoNation calls
    100.0% GAIN on Monster Beverage calls
    100.4% GAIN on Walgreens Boots Alliance puts
    100.4% GAIN on ON Semiconductor calls
    257.7% GAIN on Dell calls

    101.0% GAIN on Apollo Global Management calls
    103.6% GAIN on JP Morgan  Chase calls
    105.3% GAIN on DraftKings calls
    101.3% GAIN on Airbnb calls
    203.0% GAIN on Shopify calls
    102.0% GAIN on Cboe Global Markets calls
    100.9% GAIN on Boeing calls
    102.1% GAIN on Microsoft puts
    102.3% GAIN on First Solar calls
    101.5% GAIN on PulteGroup calls
    101.0% GAIN on Apple calls
    209.4% GAIN on NXP Semiconductors calls
    100.8% GAIN on Uber Technologies calls
    100.4% GAIN on Academy Sports and Outdoors puts
    102.2% GAIN on Trade Desk calls
    100.8% GAIN on DoorDash calls
    100.0% GAIN on Camping World Holdings puts
    100.0% GAIN on Cboe Global Markets calls
    100.2% GAIN on C3.ai calls
    238.5% GAIN on Oracle calls

     
     
     


     
     

    Rainmaker Ads CGI