Will Bank of America Corp (NYSE:BAC) Maintain Its Bullish Run?
Bank of America Corp (NYSE:BAC) has been on a bullish run since reporting its third quarter results in early October, which beat analysts’ expectations by a slight margin. The question on most investors’ minds is whether BAC will maintain its bullish momentum given that it has rallied by about 125% since early 2016.
Bank of America has been on a bullish run over the last two years.
Opinion is split on whether the bullish trend has run its course or is still intact.
The bank’s management remains optimistic on its future prospects.
Opinion among analysts is split into two camps with one group stating that BAC has risen as far as it can go and that the only option left is for the stock to decline. The other group strongly believes that the existing macroeconomic factors favor BAC and as such the stock is likely to rise up to $40 per share in the next few years.
BAC has done extremely well as compared to its peers over the last two years given that financial stocks have been on an uptrend during this period. Citigroup Inc (NYSE:C) has rallied by 81% over the same period, while JPMorgan Chase & Co. (NYSE:JPM) and Goldman Sachs Group Inc (NYSE:GS) have rallied by 70% and 54% respectively.
The bear case for BAC is based on the fact that the bank has rallied by a bigger margin as compared to its peers, which means that it is no longer undervalued in relation to other financial services stocks. The company has also outperformed the overall financial services sector as tracked by the Financial Select Sector SPDR Fund (NYSEARCA:XLF), which gained about 26% over the two-year period.
The bull case for BAC is anchored on the fact that the U.S. economy is expanding and the Federal Reserve is on track to raise rates for the third time this year. The recovery in the U.S economy has been good for BAC as the demand for financial services has increased as compared to the post-recession period.
Higher consumer spending in the U.S. has been quite good for BAC as its consumer banking unit recorded a 15% increase in net income over the last year. This trend is expected to continue into the future, which bodes well for BAC’s revenues, as the trend is likely to generate more income for the bank and more profit for its shareholders.
The bank has also recorded growth in the number and value of loans issued, while at the same time reducing the overall percentage of non-performing loans; the bank also remains optimistic on its future growth prospects amid the recovery in the U.S. economy.
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