The shares of the bank are rising following strong jobs report
Bank of America Corp (NYSE:BAC) was successful in beating the Street expectations when it posted second quarter earnings for fiscal year 2016. Despite this, several questions were raised against the bank regarding its sustainability. It has cited fears of violence, regulatory issues, US election and Brexit to affect its business potential, business plans, and changing consumer sentiments. As a result, the bank has never been able to get rid of the steep discount on its book value since the Great Recession. Due to this, the shares of the bank have always received mixed opinions in the market.
Despite all these issues, the bank has worked its way out of the regulatory issues, maintaining a strong balance sheet and a growing book value. Investors, however, resisted from investing in banks as their revenues and earnings were subject to interest rates which had been kept quite low by the Federal Reserve. This was done to ensure the health of the US economy.
However, the US employment report was released on Friday, August 5 following which the Feds have indicated that they were tempted to raise the interest rates by September FY16 or later this year. They have not taken a prompt decision as the consumer spending patterns are still uncertain, despite the bank’s result posing a stable market outside the energy sector. This is because the automobile sales have been extremely disappointing and people are concerned about auto-loans.
Investors’ expectation of interest rate hike in near future has increased significantly. This is putting increasing pressure on the Feds to raise the interest rates. Due to this, $159.63 billion bank’s stock has rallied on the back of this strong jobs report. The stock is expected to record all-time highs as the economy sets to show good momentum. It is expected that a good labor market would start pulling more and more people back in the workforce. The economy would continue to become stable for as long as consumers continue spending in the future.
Having said this, it is understood that these things would take time to materialize. The North Carolina-based bank is already trading up 3.94% since market opened on Friday, August 5. However, this has not reflected upon the year-to-date performance as the bank is trading down 10.58% YTD through Friday. This is at par with competition, Citigroup Inc. (NYSE:C) which is also trading down 11.65% YTD. Nonetheless, there is hope as the market indexes, Dow Jones and S&P 500 are performing better and are trading up 6.41% and 6.79%, respectively, on YTD basis.
The shares of the bank are traded at a daily range of $14.75-15.06 and within the 52-week range of $10.99-18.09. The total shares outstanding for the $159.63 billion company are 10.20 billion, out of which 120.94 million are traded in active market hours.
Investors have hope after strong employment figures issued by the labor department of the US, thus, they maintain a bullish stance over the stocks of the bank. Analysts at FactSet Fundamentals have issued 21 Buy, six Overweight, and six Hold ratings on the stock. The 12-month median price target is set at $16.95, 12.62% up since the market closed on Friday, August 5.