Bank of America Corporation (BAC) is a financial holding company with a number of banking and non-banking subsidiaries providing a range of banking and non-banking services and products. Although the Bank of America Corp stocks has underperformed its peers over the past few weeks, experts have deemed the stocks to have great potential in the recent future amidst the global economic crisis pertaining to the current COVID-19 virus scenario and its effect all across the world, leading to lockdown in several countries.
BAC shares are expected to have an inline return in the next few months relative to the market. While valuation metrics show that the Bank of America stocks are undervalued, its VGM score of C and Value score of B indicates it to be a great opportunity for investment and value investors.
Although it has been a rough journey for BAC with shares down by about 22% from the 52-weeks highs it soared to, in January. The S&P 500 has also seen a double decline, currently sitting at 9.8% off its all-time highs in February. BAC is also worse than the 13% drawdown observed in the Financial Select Sector SPDR ETF.
What makes BAC a great investment prospective amidst the current slowdown and its underperformance in the market?
BAC pays a 2.5% dividend, and its shares trade at roughly 9 times earnings in spite of all estimates that call for positive revenues and earnings growth in 2020 and 2021. The financial health and growth prospects of BAC shares highlights its potential of inline performance with the market. Analysts and experts predict earnings growth close to 9.8% in 2020.
The sector had been under pressure even after considerable earnings six weeks ago, owing to the slash in interest rates that crimped the bank’s interest margins.
The recent price changes and earnings estimate revisions indicate that the stocks are going to be solid after the recent decline. Some similar instances of JPMorgan, CitiGroup and Goldman Sachs can be taken into consideration to establish this fact. While the drop of BAC has been the worst, JPMorgan did the best among the lot with its share down by 17.5%.
It is yet to be observed if the BAC will continue to drop or if it has hit the bottom.
If it continues to lower, it may take a retest of recent lows from the S&P 599 and other negative events. It might also test down into multi-year range support between $26 to $26.50, which can be considered to be a great buying opportunity for investors. The thing to notice is if the BAC stocks can reclaim the $30 to $31 mark, and the 50 weeks moving average with the 200-week moving average being in play at $25.50 with an upwards trend. BAC stocks might as well be range-bound for the time being, making it a great investment opportunity for investors amidst a global economic slowdown in present times.