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Bank of America Corporation Message Board

  • longtermguy91 longtermguy91 Apr 13, 2012 6:50 PM Flag

    Let's be realistic

    Here's some clear realistic thinking.

    BAC is undervalued relative to the rest of the banks. It has a history of bad earnings reports. It only pays a token dividend. It's an unloved stock.

    The stress test was passed, convincing people that the company doesn't need to raise more capital. That removed one shadow hanging over the company.

    Lawsuits are getting settled, slowly but steadily. This is removing another shadow hanging over the company.

    The next step is returning to solid earnings, so the company can start paying out dividends. This earnings report and the next are where BAC can show itself to be a solidly profitable bank on the road to a healthy dividend.

    If it can establish these things, the stock will be $14+. It will get back into the league of JPM and WFC which trade at healthy prices.

    If the coming earnings report is good, that should put BAC on the right track to meet these goals. It make take a few good earnings reports to push this stock to where it should be (around $20/share).

    It's a mistake, though, on a day like today, where the overall market is determining how BAC trades, to assume that there can only be days like today. If BAC, as a separate entity, has strong earnings, we can see a big jump in the stock. WFC and JPM already had good earnings discounted into the stock price. BAC doesn't have good earnings discounted into the stock price.

    Now, does that mean good earnings will push it above $10? One can dream, but there are a lot of options expiring the next day, so it's unlikely, unless there is extremely positive guidance.

    Patient longs should be fine in the long run, but near-term volatility is likely to be extreme, like we have seen this week.

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