Bank of America (NYSE:BAC) surges on higher-than-expected earnings and advances to cyclical highs on Q3 results
Bank of America’s share price jumped on better-than-expected trading update.
US banks kicked off the earning session this week with some good numbers on the table. Particularly impressive was Bank of America’s double-digit revenue growth in the third quarter, which totalled $22.8 billion. Net income rose to $7.7 billion.
In comparison, JP Morgan (JPM) and Wells Fargo (WFC) revenue growth was +1 percent and -2 percent respectively.
The US banking sector, particularly the investment banking division, has been enjoying higher earnings this year on the exuberant stock market and an improving economy. A buoyant market typically generates more trading activities, dealmaking, and IPOs.
Not only are US banks enjoying good results, some UK banks are too recovering from the pandemic. Barclays (BARC) and Lloyds (LLOY) are both trading higher this week. The latter is about to reach 50p.
As the global economy improves further, the financial sector may outperform the market.
Bank of America (NYSE:BAC) rallied to new cyclical highs. In doing so, its technical trend suggests more upside potential.
Take a quick look at its weekly bar chart. There is no resistance until the round number at $50 – around 10 percent upside from here.
Casting our view further, we expect the stock to challenge its 2007 highs in the months ahead. But whether it can surpass this peak at around $55 remains questionable – simply because the Global Financial Crisis damaged BAC’s business badly.
(Note: both JP Morgan (JPM) and Goldman Sachs (GS) have both rallied above their 2007 peaks.)
Bank of America (NYSE: BAC) forecasts
Bank of America is one of the world’s largest banks. Its market capitalisation is currently more than $370 billion – which is the world’s 20th largest corporation. This market cap is about 3x that of HSBC (HSBA, $111 billion) or 8x the size of Lloyds (LLOY, $46 billion).
Despite its size, the market is expecting the Bank of America to grow further in the next year. According to some aggregation, the median target is $47, with half the panel suggesting a ‘Buy’ rating (see below). The highest target is around $55.
BAC is trading at a reasonable price-earnings ratio of 13.5 and fetches a dividend yield of 1.95 percent.
In April this year, the BAC board authorised a $25 billion stock buyback.