Bank of America: A Compelling Buy with Strong Growth Prospects and Resilience

Analyst Mike Mayo from Wells Fargo maintained a Buy rating on Bank of America (BAC – Research Report) and keeping the price target at $56.00.

Mike Mayo has given his Buy rating due to a combination of factors that highlight Bank of America’s potential for growth and resilience. One of the primary reasons is the bank’s strong position following 15 years of de-risking, which has been validated by the Fed’s stress tests, indicating that losses during economic downturns should be manageable. Additionally, Bank of America’s improved earnings capacity is expected to handle reserve builds similar to those seen during the COVID-19 pandemic in just one quarter.
Another factor contributing to the Buy rating is the bank’s traditional banking strengths, particularly in loan, deposit, and checking account growth, coupled with effective expense management. This positions Bank of America well in a market where traditional banking is expected to perform better. Furthermore, the bank’s valuation appears attractive, with a forward price-to-earnings ratio at the lower end of its historical range, despite strong growth prospects. The forecast of over 40% EPS growth over three years further supports the positive outlook, making Bank of America a compelling investment opportunity.

In another report released on May 23, DBS also maintained a Buy rating on the stock with a $48.00 price target.