Will This Analyst Downgrade Hurt Bank of America (BAC) Stock Today?

NEW YORK (TheStreet) -- Shares of Bank of America  (BAC) were flat in pre-market trading Wednesday after Nomura  (NMR) downgraded the stock to "neutral" from "buy," and set a $17 price target.

See why TheStreet's Jim Cramer says he would've reiterated the buy rating for Bank of America:


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The firm said Comprehensive Capital Analysis and Review is a binding capital constraint for the company.

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Separately, TheStreet Ratings team rates BANK OF AMERICA CORP as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate BANK OF AMERICA CORP (BAC) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for BANK OF AMERICA CORP is currently very high, coming in at 86.47%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.28% trails the industry average.
  • Despite the weak revenue results, BAC has outperformed against the industry average of 15.3%. Since the same quarter one year prior, revenues slightly dropped by 5.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, BANK OF AMERICA CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • BANK OF AMERICA CORP's earnings per share declined by 40.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, BANK OF AMERICA CORP increased its bottom line by earning $0.91 versus $0.25 in the prior year. For the next year, the market is expecting a contraction of 11.5% in earnings ($0.81 versus $0.91).
  • You can view the full analysis from the report here: BAC Ratings Report

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