Bank of America Stock Price Forecast February 2022 – Time to Buy BAC Stock?

With a YTD gain of 8.5%, Bank of America stock is outperforming the S&P 500 by a wide margin this year. It had outperformed in 2021 as well as bank stocks saw a rerating amid the rise in interest rates.

Bank of America is the second-largest bank in America after JPMorgan Chase. What’s the forecast for BAC stock in 2022 and should you buy it now?

Banking stocks have outperformed

Banking stocks are cyclical in nature. US banks had to make higher loan loss provisions in 2020 amid the economic downturn. However, 2021 was a different ballgame for banking stocks. The US economy rebounded sharply from the 2020 lows and after easing in 2020, we are now staring at a gradual rollback of the accommodative easing policy. The Fed is expected to raise multiple times this year, beginning as soon as the next month.

Banks generally borrow at the short end of the curve and lend at the long end. As a result, banks including Bank of America tend to outperform in a rising rate environment. In a rising rate environment, banks make a higher margin as compared to a low interest rate environment. If the economic momentum sustains in 2022, bank stocks might continue to outperform.

68% of all retail investor accounts lose money when trading CFDs with this provider.

Bank of America stock recent developments

Last month, Bank of America released its earnings for the fourth quarter of 2021. Its revenues of $22.17 billion were slightly below the $22.2 billion that analysts were expecting. However, its EPS of $0.82 was ahead of the $0.76 that analysts were expecting. It also released $851 million in reserves amid the improved credit quality.

Bank of America is the second-largest holding for Berkshire

Berkshire Hathaway chairman Warren Buffett has a flair for banking and financial stocks. Buffett has long strived to keep the conglomerate’s holdings in banks below 10% to escape regulatory scrutiny. He sold bank shares whenever the holding was getting near 10%. However, he made an exception for Bank of America and increased the stake beyond 10%. According to the most recent filings, Berkshire Hathaway is the largest BAC shareholder and holds a 12.3% stake in the company.  BAC is the second biggest holding for Berkshire Hathaway, just behind Apple.

Buffett’s faith in BAC has paid of well and the conglomerate is sitting on massive profits on its investment. While Buffett has sold stakes in several banks like JPMorgan Chase and Wells Fargo, he continues to remain bullish on BAC.

BAC stock forecast

Wall Street analysts have a split rating on Bank of America stock. Of the 29 analysts polled by CNN Business, 17 rate the stock as a buy while nine rate them as a hold. The remaining three analysts have a sell rating on BAC. Its median target price of $51.5 is a 6.7% premium over current prices. However, its street-high target price of $66 is a premium of over 36%.

In December, JPMorgan has said that BAC is a top bank pick for 2022. “We continue to rate Bank of America Overweight relative to our universe, reflecting the benefit from its strong retail franchise, greater sensitivity to long and short term rates, ability to return capital, and lower credit risk,” said JPMorgan Chase in its note.

Bank of America target price raised by Wells Fargo

Today, Wells Fargo raised its target price on Bank of America stock to a street high of $66. We believe that BAC has understated upside in a rising rate environment,” said Wells Fargo analyst Mike Mayo in its note.

He added,” Cyclically, the rate backdrop helps BAC more than peers given $2 [trillion] of mostly sticky, low-cost deposits that should help fund higher yielding securities and loans.”  He also believes that BAC is a leader among banks when it comes to tech adoption.

As fintech companies continue to snatch market share from traditional banks, they have been looking to increase their tech capabilities. Apart from making investments in tech, legacy financial companies have also been looking at acquisitions. Recently UBS had announced the acquisition of Wealthfront, an online wealth management focussing on US millennials.

Wells Fargo is bullish on BAC stock

In his note, Mayo added, “We single BAC out given the concern about wage and expense pressure in recent economic releases. BAC has committed to allowing benefits to reach the bottom line and do so with a model, in contrast to some peers, that has had shrinking headcount — not bad when there is concern about wages.”

Bank of America stock dividend

As the earnings environment for banks improves, BAC might also look at increasing its dividend. It currently has a dividend yield of 1.74%. While the yields are currently higher than the S&P 500, they are lower than some of the other US banks.

Should you buy Bank of America stock?

BAC stock is looking bullish on the charts. It found strong support at the 200-day SMA (simple moving average) and has now also risen above the 50-day SMA. The stock is in a technical uptrend. The 14-day RSI (relative strength index) is 61.3 which is a neutral indicator.

Bank of America stock trades at an NTM (next-12 months) PE of 14.9x and a price-to-book value multiple of 1.6x. The multiples seem reasonable considering the fact that investors have been pivoting towards mature and strong companies.

If the economic environment continues to strengthen, BAC could deliver good returns in 2022 as well, just like it did in 2021.

Buy BAC Stock at eToro from just $50 Now!