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BofA Upgraded to Buy from Hold by CFRA on Fundamentals

'BAC benefits from higher rates and higher loan volumes in a strong 2022 U.S. economy,' said CFRA analyst Kenneth Leon.
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Bank of America  (BAC) - Get Bank of America Corp Report shares rose Tuesday, after CFRA raised its rating to buy from hold and increased its price target to $51 from $45.

“BAC benefits from higher rates and higher loan volumes in a strong 2022 U.S. economy,” CFRA analyst Kenneth Leon wrote in a commentary.

The stock recently traded at $47.33, up 2%. It has jumped 17% over the past three month amid the economy’s strength, anticipation of tighter monetary policy and the bank’s strong financial performance.

Leon’s $51 price target encompasses a price-earnings ratio of 14.6 based on his 2022 earnings estimate, above the 12.8 historic average, he said.

“We expect BAC to post Q4 2021 EPS of $0.81, excluding favorable loan loss reserve reversal, while realizing 9% to 11% total revenue growth,” he said.

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Morningstar analyst Eric Compton likes BofA. 

“We caution investors that the banking sector appears relatively fully valued, albeit not supremely overvalued,” he wrote last month, when he raised BofA’s fair value to $38 from $35.

“Wide-moat-rated Bank of America recorded solid third-quarter earnings, beating the FactSet consensus EPS estimate of $0.71 with a reported EPS of $0.85,” Compton said. “This equates to a return on tangible common equity of 16%.”

Further, “The bank seems poised to reach its goal of gaining an additional $1 billion in its quarterly net interest income run rate by the fourth quarter, which we thought the bank might miss,” he said.

“In our Bank of America model, we are projecting roughly $7 billion in extra net interest income coming from rate hikes by 2025. The fee environment remains exceptionally strong.”