Bank of America Gets Upgrade, 6 Target Price Hikes--But Mayo Says Sell (Update 2)

TheStreet.com

Bank of America story updated with changes by analysts Horowitz and Bongardt and new pricing info.

NEW YORK (TheStreet)--Bank of America BAC saw six analysts raise their target prices on the stock following its first quarter earnings announcement Thursday, one of whom upgraded the stock, though CLSA analyst Mike Mayo slapped a "Sell" on the bank's shares.

Three analysts raised their target prices to $10, while leaving neutral/market perform recommendations on the stock. Nomura's Glenn Schorr, and Keefe, Bruyette & Woods' Jefferson Harralson both raised their target prices to the $10 mark from $9, while Sterne, Agee & Leach analyst Todd Hagerman came all the way up from $6.

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Bank of America has been selling businesses and slashing headcount to compensate for mortgage-related litigation costs that could reach $30 billion.

RBC Capital Markets analyst Joe Morford, meanwhile, raised his target price to $11 from $10, maintaining an "Outperform" recommendation on Bank of America shares.

Later on Friday, Citigroup analyst Keith Horowitz raised his price target to $9 from $8.5, while leaving his recommendation at "neutral," while Stefan Bongardt of German firm Independent Research upgraded his recommendation to "hold" from "sell," raising his price target to 9 from 6.5.

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Bank of America has been selling businesses and slashing headcount to compensate for mortgage-related litigation costs that could reach $30 billion. While analysts have been impressed with the bank's progress in shoring up its balance sheet, they are now focused on earnings power, which they see as sharply diminished.

"While the company is executing well on what it can and capital is building, we hesitate to dive in as we think the continued earnings ramp will be gradual and over the long term given low rates and slow burn-off of mortgage-related costs," Nomura's Schorr wrote on Thursday.

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But CLSA analyst Mike Mayo appeared to get the most attention on Friday. He left his price target at $8 but lowered his recommendation to "Sell" from "Underperform," citing "our ongoing view that the firm's earnings power is declining and its uncertain ability to significantly reduce expenses without damaging the franchise."

Mayo argues Bank of America has had an average of 10 one time or unusual items per quarter since the first quarter of 2010.

Bank of America shares opened higher following its earnings report Thursday, but finished the day down 1.68% at $8.77. Shares were higher in pre-market trading ahead of Mayo's downgrade, but lost momentum throughout the day and closed near their lows--down 4.68% at $8.36.

-- Written by Dan Freed in New York.

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