Bank of America Hits 52-Week High: Should You Buy BAC Stock Now?

Bank of America Corporation BAC shares touched a new 52-week high of $47.74 during Monday’s trading session. Quarter to date, the stock has risen 19.7%, outperforming the Zacks Finance sector and the S&P 500 Index. Also, BAC stock has fared better than its industry peers — Citigroup Inc. C and JPMorgan Chase & Co. JPM.

Quarter-to-Date Price Performance

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Does BAC stock have more upside left despite hitting a 52-week high? Let’s try to find out.

Factors Likely to Impact Bank of America’s Stock

Presidential Election Results to Aid Revenues: On Nov. 5, the U.S. presidential elections were held, resulting in a win for Donald Trump. The expansionary stance of the President-elect fueled the equity markets rally, with the S&P 500 index crossing the 6,000 mark for the first time on Nov. 8. Further, the index hit an all-time high in yesterday’s trading session demonstrating that the rally continues.

The expansionary stance and enhanced focus on domestic manufacturing will likely boost loan demand and drive BAC’s net interest income (NII) higher. Further, this will support the company’s fee income growth. Moreover, anticipated tax cuts will likely enhance profitability.

Additionally, the Federal Reserve has started lowering interest rates (50 basis points or bps cut announced in September and 25 bps earlier this month). This, along with future rate cuts, will support BAC’s NII as funding costs gradually stabilize and then come down.

Management expects NII in the fourth quarter of 2024 to improve sequentially and expand further next year.

Also, the bank’s efforts to expand its financial centers in new and existing markets through renovation and upgrades will further improve digital offerings and cross-selling opportunities, aiding revenue growth. By 2026, BAC plans to expand its financial center network and open more than 165 centers.

Bank of America’s total revenues witnessed a compound annual growth rate (CAGR) of 1.6% over the last five years (2018-2023). Loans witnessed a 2.2% CAGR over the same period. While the trend reversed marginally for revenues during the first nine months of 2024, the uptrend for loans persisted.

Revenue Growth Trend

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Solid Balance Sheet Position: As of Sept. 30, 2024, BAC’s total cash and cash equivalents were $295.3 billion and total debt was $831.6 billion.

Further, the bank had $855 billion of deposits in excess of loans, indicating a strong liquidity position. This reflected a stable deposit balance and an enhanced liquidity profile.

Liquidity Trend

Image Source: Bank of America Corp.

Additionally, Bank of America maintains investment-grade long-term senior credit ratings of A1/A-/AA- from Moody's, S&P Global, and Fitch, respectively, along with a stable outlook as of Oct. 15, 2024. This renders the company easy accessibility to the debt market.

Hence, a decent liquidity profile and consistent earnings strength enable the company to address its near-term debt obligations.

Strong Capital Position: As of Sept. 30, 2024, Bank of America’s Common Equity Tier 1 ratio and the total capital ratio of 13.2% and 14.9%, respectively, were well above the regulatory requirements.

Bank of America’s focus on maintaining a strong capital position supports its capital distribution activities. Post clearance of the 2024 stress test, the bank hiked its quarterly dividend by 8.3% to 26 cents per share.

Further, the company has been consistently paying quarterly cash dividends. The bank hiked dividends four times during the last five years with a dividend payout ratio of 33%.

Dividend Yield

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Similarly, JPM has increased its dividend four times over the past five years, while C has increased it just twice over the same time frame.
 
Also, BAC has a share repurchase plan. As of Sept. 30, 2024, roughly $22.4 billion worth of shares remained available for repurchase under the authorization.

Weak Investment Banking Performance: Bank of America has been witnessing a subdued performance of the investment banking (IB) business due to poor performance of the underwriting and the advisory as deal-making activities were muted amid the Russia-Ukraine conflict, recessionary fears and inflationary pressures during 2022 and 2023. The company witnessed a decline in total investment banking fees in 2023 on industry-wide muted performance.

Of late, the IB business has revived with corresponding increase in fees. But a solid improvement in the IB business will take time.

Bullish Analyst Sentiments on BAC

Over the past month, the Zacks Consensus Estimate for earnings of $3.27 and $3.65 per share for 2024 and 2025, respectively, moved marginally upward.

Estimate Revision Trend

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The projected figures imply a decline of 4.4% for 2024 with subsequent growth of 11.6% for 2025.

Final Thoughts on BAC Stock

Rate cuts, efforts to expand the financial center network and a solid balance sheet are likely to support Bank of America’s financials. Moreover, the incoming regime’s expansionary moves will further complement the bank’s growth initiatives to boost its top line.
 
However, subdued IB segment performance remains a concern. Thus, BAC stock remains a cautious bet for investors at the moment. Those who already own it can hold it for now.

BAC currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Bank of America Corporation (BAC): Free Stock Analysis Report
 
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