NEW YORK ( TheStreet) -- Bank of America ( BAC - Get Report) bull Dick Bove has tripped up a couple of times with calls he has made on the stock, but he's still sticking to his guns. The bank's shares are about three to four years away from $30, according to the veteran analyst.
"I think there's $3 in earnings power there and this stock can easily sell at 10 times earnings, once you recognize that the company is two companies: its Countrywide and its Bank of America and once you get Countrywide taken out of Bank of America, which is the lawsuits are paid, the bad loans are paid the foreclosures are done, all of a sudden Bank of America is there and Bank of America can earn three bucks," Bove said in an interview on Tuesday. The latest positive sign Bove sees from the bank is a rally in its bonds. "The value of its debt is soaring at the present moment. In the third quarter of 2011, the company was being attacked on the basis that it could be run out of business similar to a Lehman Brothers or a Bear Stearns, and the value of its debt fell dramatically," Bove recalls. Since then, however, the debt has rebounded, enabling Bank of America to issue debt last week that yielded just 3% more than 10-year Treasuries, where comparable debt from JPMorgan Chase ( JPM - Get Report) sold at 2.7% above Treasuries only a week prior to that, Bove says, pointing to the turnaround as a tremendous vote of confidence from the bond market in Bank of America's ability to pay its debts. To Bove's credit, he began recommending investors buy the bonds at those low levels of last year, and he believes that confidence will eventually translate to a rise in the stock far greater than the 42.18% it has gained year to date. "I don't consider that anything given
how low the stock was," he said. "The bond market is telling the stock market something very significant about Bank of America. The bond market is telling the stock market this company is out of the woods, this company has changed, this company is not insolvent, and if the stock investors figure it out they will push these shares sharply higher."
Not all analysts are in agreement. In a Jan. 31 report, Stifel Nicholas analyst Christopher Mutascio argued "normalized earnings" for Bank of America--which he expects it will reach in 2014--is $1.14 per share, down from his previous estimate of $1.85. The biggest driver of the downward revision comes from Mutascio's expectation of lower fee income on a drop in equity investment gains and reduced investment banking and trading profits. And Bove has been too optimistic too early on Bank of America in the not-too-distant past. In May of 2010, for example, he argued Bank of America shares, which were worth $15.40 at the time, would hit $99.31 by 2015. In that same interview , he argued Citigroup ( C - Get Report) would hit $24.75 in 2015, which, since the prediction came before the bank's one for 10 reverse split, would now equate to $247.50. Seven months later, Bank of America shares had fallen to about $12.50 per share, but Bove predicted they would rise to $32 in about three years from that time, or by December 2013. -- Written by Dan Freed in New York. Follow this writer on Twitter.