Momentum Stock in Focus: Bank of America Corporation (NYSE:BAC)

shares of Bank of America Corporation (NYSE:BAC) reached at $33.23 price level during last trade its distance from 20 days simple moving average was -0.78%, and its distance from 50 days simple moving average was -4.60% while it has a distance of -3.94% from the 200 days simple moving average.

Bank of America (BAC) was among the top performing bank stocks in the second half of 2022, returning 6.4% over the last two quarters of the year. Overall, the nation’s second-largest bank was down about 26% in 2022.

As a new year begins, investors may be wondering if the bank stock’s momentum from the second half of the year will continue this year amid much economic and market uncertainty. Here are several reasons Bank of America remains a buy in 2023.

Why Bank of America outperformed in the second half of the year

Bank of America, like many banks, got a boost in 2022 as the Federal Reserve started aggressively hiking interest rates. After raising rates 25 (0.25%) basis points in March and 50 basis points in May, the Fed increased rates by 75 basis points at each of the four meetings that followed. It ended the year with a 50-point rate hike, which puts the federal funds rate that banks charge each other for overnight loans in the 4.25%-to-4.5% range.

Although inflation is starting to tick down, it is nowhere near the 2% range the Fed is targeting, so expect more interest rate hikes in 2023 and beyond — albeit at a less aggressive pace. This should help Bank of America in 2023, perhaps more than many of its competitors, for a few reasons.

The first reason is that loan activity should remain robust for the bank, even in an economy that is forecast to slow, and possibly even go into a recession. The bank reported fourth-quarter and year-end earnings on last Friday, and revenue and earnings topped analysts’ forecasts. The company is anticipating loan growth in 2023, which along with rising interest rates, should lead to a boost in net interest income in 2023.

Investors must also consider the deposit beta. Just as banks can charge higher interest rates on loans, they must raise the interest paid on deposits. The amount a bank raises interest rates on deposits is called the deposit beta. Even though in the fourth quarter Bank of America raised its interest-bearing deposit costs from 0.40% in Q3 to 0.96%, that is still among the lowest for big banks. Nevertheless, Bank of America will likely have to continue to raise its deposit costs in 2023 to remain competitive.

Among the 10 largest banks, Bank of America had the second-lowest deposit cost in the third quarter, behind only Wells Fargo, according to S&P Global data. Lower deposit costs typically translate to higher net interest income. This will be something to watch in 2023, but it is a good sign that Bank of America was able to increase average deposits in consumer banking by 2% year over year to over $1 trillion in the fourth quarter. This suggests that customers aren’t going elsewhere for better interest rates.

Liquidity:

The stock has a market cap of $260.83B with 8.11B shares outstanding, of which the float was 8.01B shares. Analysts consider this stock active, since it switched Trading volume reached 42,707,120 shares as compared to its average volume of 39.49M shares.

The Average Daily Trading Volume (ADTV) demonstrates trading activity related to the liquidity of the security. When Ave Volume tends to increase, it shows enhanced liquidity.

But when Ave Volume is lower, the security will tend to be cheap as people are not as keen to purchase it. Hence, it might have an effect on the worth of the security. BAC’s relative volume was 1.08.

Relative volume is a great indicator to keep a close eye on, but like most indicators it works best in conjunction with other indicators and on different time frames. Higher relative volume you will have more liquidity in the stock which will tighten spreads and allow you to trade with more size without a ton of slippage.

Bank of America Corporation has an average true range (ATR) of 0.87. Other technical indicators are worth considering in assessing the prospects for EQT. BAC’s price to sales ratio for trailing twelve months was 4.34 and price to book ratio for most recent quarter was 1.12, whereas price to cash per share for the most recent quarter was 0.31.

The Company’s price to free cash flow for trailing twelve months was 0. Its quick ratio for most recent quarter was 0. Analysts mean recommendation for the stock was 2.30. This number is based on a 1 to 5 scale where 1 indicates a Strong Buy recommendation while 5 represents a Strong Sell.

Bank of America Corporation‘s shares owned by insiders remained 0.14%, whereas shares owned by institutional owners are 71.00%.

Meanwhile, BAC traded under umbrella of Financial sector, the stock was traded -33.69% ahead of its 52-week high and 13.37% beyond its 52-week low. So, both the price and 52-week high indicators would give you a clear-cut picture to evaluate the price direction.

About Brad Watson

This is Brad Watson and I like to introduce myself as an adviser, in the Financial Stocks Sector. I worked independently as a self motivator and with the financial institute as financial adviser to invest in the financial sector for over 7 years in the developing countries by introducing new phases and ways to improve in the Financial sector. I analyze trading strategy, individual stocks, asset classes, market sectors, and risk to reward parameters in order to provide valuable insight to the alphafinstocks.com community. I like to travel all over the globe to get new experience and provide by best services to the companies. As an adviser I like to work with new people to share and explore new ideas keeping in view minimizing the operating cost and giving the best final product through new Financial and minimizing the time of development.

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