This BAC Stock Forecast article was written by Opher Joseph – Financial Analyst, I Know First.

Highlights

• BAC traded at 52-week high in Nov-2021 at $48.37.
• Bank of America expected to consolidate steady earnings and financials in the coming periods with modest growth predictions.
• The 3-year average share buyback ratio is 5.6 that better than 97.60% of companies in the industry.

Overview

Bank of America is one of the largest financial institutions in the United States, with more than $2.5 trillion in assets. It is organized into four major segments: consumer banking, global wealth and investment management, global banking, and global markets. Bank of America’s consumer-facing lines of business include its network of branches and deposit-gathering operations, home mortgage lending, vehicle lending, credit and debit cards, and small business services. The company’s Merrill Lynch operations provide brokerage and wealth management services, as does U.S. Trust private bank. Wholesale lines of business include investment banking, corporate and commercial real estate lending, and capital markets operations. Bank of America has operations in several countries.

Bank of America Corporation, has seen tremendous performance and growth even during the pandemic when some of its peers have faltered in 2021. It witnessed a recent growth of 41% in its stock price reaching its 52-week high at $48.37 in Nov-2021 and now trading at $45.40 on 19-Nov-2021 with a market cap of $ 379.09 billion. The financial sector remains attractive amongst bullish calls in the long run from which Bank of America will certainly gain. Interest rate changes are on the horizon with growing inflation concerns and recovery of the US economy from the pandemic effects, the financial sector needs to be geared up to deal with higher lending rates.

Looming Interest Rate Hikes Following Inflationary Pressures

In mid-March, the Fed increased its 2021 GDP growth forecast to 6.5%. Bank stocks tend to perform well as the economy strengthens. In a growing economy, increasing demand for loans and decreasing default rates are likely to boost profit margins for companies like Bank of America. The Federal Reserve recently announced it would keep its overnight lending rate near zero, for now, suggesting that rates are not going to increase any time soon.

However, there is growing sentiment in the market regarding the high inflationary pressures on the economy, which would force its hand on the Fed to revise interest rates in the coming year if not earlier.

Solid Profitability and Capital Returns

Over the last three quarters, Bank of America has recorded a net interest income of $31.5 billion versus $33.1 billion in the comparable period from last year. The company is expected to consolidate steady earnings and financials in the coming periods with modest growth predictions compared to last year. This may lead to temporary corrections after the coming annual financial results and the interest rate hikes by Fed, although it is expected to out-perform its competitors.

Due to strong growth in deposits in Q3, loan balances increased for the second consecutive quarter, leading to an improvement in net interest income (NII) even as interest rates remained low. Specifically, NII grew by 8.41% to $11.1 billion over the last quarter. It also shows positive signs of debt quality in its books, the provision of doubtful debt going down to $ 624 mn from $ 1621 mn in the previous quarter, thus improving the book assets quality.

Furthermore, the company managed to deliver a net income of $7.26 billion, a growth of 64% against Q3 2020. This was driven by, as mentioned, strong deposit growth, and Pay-check Protection Program (PPP) activities. With these positive signals, it continues to trade at industry high P/E ratio of 13.97 with further bullish trends in 2022.

Bank of America’s growing stock repurchases contribute significantly to EPS growth, and hence, to shareholder value creation. In 2019, Bank of America’s stock buyback activity hit a record of around $28 billion. The buybacks have now picked up again in 2021. In Q3, the company repurchased $10 billion worth of shares, a significant increase from $4.21 billion in Q2. At this rate, the company would essentially be buying back around 10.2% of its stock per annum. BAC’s 3-year average share buyback ratio is 5.6 that better than 97.60% of companies in the Banks industry.

Combined with the company’s latest 17% dividend hike, Bank of America has been generous to its shareholders lately, offering massive capital returns.

Wall Street’s Take on Stock Forecast

Turning to Wall Street, Bank of America has a Moderate Buy consensus rating, based on 11 Buys, four Holds, and one Sell assigned in the past three months. At $48.03, the average Bank of America price target implies 1.5% upside potential.

Despite these moderate calls, I remain positive about the stock. With strong cash flows and deposits under its arsenal, BAC is a favorable bet in the long run.

Turning to Wall Street, Bank of America has a Moderate Buy consensus rating, based on 11 Buys, four Holds, and one Sell assigned in the past three months. At $48.03, the average Bank of America price target implies 1.5% upside potential.

Despite these moderate calls, I remain positive about the stock. With strong cash flows and deposits under its arsenal, BAC is a favorable bet in the long run.

The stock seems to be correcting thus presenting the right opportunity to enter it. Despite that in nowadays macroeconomy uncertainty creates additional volatility in stock prices there is no sign that after correction the BAC stock price tendency will change from upward to downward.

Conclusion

In the upcoming annual financial results, the company is predicted to show modest growth numbers in financials which may lead to temporary corrections also considering expected interest rate hike by the Fed in 2022. The company has a strong financials and online banking business model compared to its competitors to back its growth in 2022. In line with the market momentum in this stock, it certainly shows an upside potential of at least 14% in the upcoming periods, an uptrend price of $52, and a further bullish pattern in 2022 to follow under its arsenal, BAC is a strong bet in the long run.

It is worth paying attention that the stock-picking AI of I Know First has a high signal on the one-year market trend forecasts, supporting my position for the BAC stock forecast. The light green for the short-term forecasts is mildly bullish, while the darker green is a strong bullish signal for the one-year forecast.

Past Success with BAC Stock Forecast

I Know First has been bullish on the BAC stock forecast in the past. On November 13^th, 2020 the I Know First algorithm issued a forecast for BAC stock price and recommended BAC as one of the best stocks to buy. The AI-driven BAC stock prediction was successful on a 1-year time horizon resulting in more than 75.76%.

To subscribe today click here.

Please note-for trading decisions use the most recent forecast.