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Bank of America Stock Falls Due to Disappointing Q1 Results

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Bank of America (NYSE:BAC) stock fell 6.5% in pre-market trading on Wednesday after the company reported its first-quarter financial results. On Tuesday, the stock fell 0.8% and closed at $23.73 with a market cap of $207.0 billion. The stock price has risen 10.9% in the trailing five-day period, while it has fallen 21.4% in the trailing 12-month period.

Currently, Bank of America stock is trading 33.6% below its 52-week high of $35.72 on December 27, 2019. The stock is also trading 32.2% above its 52-week low of $17.95 on March 23, 2020. On a year-to-date basis, the stock has fallen by 32.6% as of Tuesday.

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Bank of America’s Q1 results

Bank of America’s first-quarter revenues, net of interest expenses, fell 1.1% YoY (year-over-year) to $22.91 billion. However, the revenues met analysts’ expectations of $22.91 billion. Meanwhile, Bank of America’s adjusted EPS of $0.37 missed analysts’ expectations of $0.46 and fell about 47.9% YoY. The company set aside about $3.6 billion for loan-loss reserves during the quarter.

According to a CNBC report, “Lower interest rates after the Federal Reserve slashed rates last month will weigh on the bank’s net interest income, one of the main drivers of a lender’s revenue,” said Bank of America CFO Paul Donofrio. He also said, “The bank posted $12.3 billion in net interest income in the first quarter, but that figure will be about $11 billion in the second quarter, and will begin to recover after that.”

Currently, analysts expect a 5.5% and 0.3% fall in Bank of America’s 2020 and 2021 revenues, respectively. Analysts also expect an adjusted EPS of $1.83 and $2.30 in 2020 and 2021, respectively.

Peer comparison

In the first quarter, Wells Fargo (NYSE:WFC) reported revenue of $17.7 billion—an 18% reduction from $21.6 billion in the first quarter of 2019. Wells Fargo missed analysts’ consensus estimate of $19.3 billion. The company’s adjusted EPS of $0.01 was below analysts’ estimates of $0.33 per share in the first quarter. However, the company reported an adjusted EPS of $1.03 in the first quarter of 2019.

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In the first quarter, JPMorgan Chase (NYSE:JPM) reported revenue of $29.1 billion—2.6% reduction from $29.9 billion in the first quarter of 2019. The company missed Wall Street analysts’ consensus estimate of $29.7 billion. JPMorgan Chase’s adjusted EPS of $0.78 was below analysts’ estimates of $1.84 per share in the first quarter. However, the company reported an adjusted EPS of $2.65 in the first quarter of 2019. Read Higher Provisions Weigh on JPMorgan Chase’s Q1 Earnings to learn more.

Analysts’ recommendations for Bank of America stock

Among the 26 analysts covering Bank of America stock, 15 recommend a “buy”—up from 14 in the previous month. Meanwhile, 11 analysts recommend a “hold”—unchanged from the previous month. None of the analysts recommend a “sell.” Analysts have an average target price of $26.76 on Bank of America. The target price implies a return of 12.8% based on the closing price of $23.73 on Tuesday. The consensus target price for the stock has fallen from $35.67 in March—a fall of 25.0%.

Wells Fargo and JPMorgan Chase have average broker target prices of $33.25 and $105.71, respectively. These figures imply returns of 10.2% and 10.7%, respectively, over the next 12 months.

Bank of America’s stock performance

On Tuesday, Bank of America stock was trading 10.0% above its 20-day moving average of $21.57. Meanwhile, the stock is trading 11.3% below its 50-day moving average of $26.75 and 22.1% below its 100-day moving average of $30.46. Bank of America’s 14-day RSI (relative strength index) score is 51. The RSI indicates that the stock isn’t “oversold” or “overbought.”

Bank of America has an upper Bollinger Band level of $24.74. The company’s middle Bollinger Band level is $21.57, while its lower Bollinger Band level is $18.39. On Tuesday, the stock closed near its upper Bollinger Band level, which indicates that it’s overbought. Bank of America’s 14-day MACD is 2.13, which suggests that the stock is on an upward trading trend.

At 9:58 AM ET today, Bank of America stock was trading at $22.35—down 5.8% from the previous session. At the same time, the S&P 500 and the Dow Jones Industrial Average fell 2.3% and 2.1%, respectively. Read US Stock Markets Rally Even as Economic Crisis Deepens to learn more.

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