Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money

67% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

  • Earnings

Bank of America share price: what to expect in Q1 earnings results

Bank of America share price: what to expect in Q1 earnings results

Bank of America's share price soared last week as the Fed's stimulus package calmed the markets. Like other banking stocks, it has seen steep declines in the coronavirus-triggered horror show that has incinerated share prices, and investor confidence.

But will Q1 earnings incite further share price gains, or will it put a brake on things?


What's happening with Bank of America's share price?

Bank of America's [BAC] share price is down 32.9% since the start of the year. It almost goes without saying that most of the selloff occurred at the back end of February. Between 20 February and 23 March, the share price fell from $34.85 to $18.08 - a huge 48% decline.

Bank of America’s share price had rallied to a 52 week high back in January after posting solid results that beat analyst expectations. That seems like a long, long time ago, in a market very far away.




Why should investors care?

Banking stocks are fighting back

Bank of America's share price gained over 24% last week. Pushing not only BoA's stock higher, but the banking sector as a whole, was the Fed's $2.3 trillion stimulus package aimed at protecting the US economy. Investors will be wondering whether this is now priced into the share price, or if there are further gains to be had.


Bank of America share price gains over the past week


Loss of revenue

The Fed's decision to cut its target rates to 0% will affect the income BoA makes from interest. Another potential area that could be problematic is loan defaults on mortgages and credit cards. With US jobless claims reaching record levels and businesses going under, people are going to struggle to pay back debt.

The US government's interventions should mitigate some of the problems.

However, in a note to clients, David Konrad at DA Davidson argued that BoA is in a better position than its peers:

“Since the 2008 crisis, [Bank of America] has outperformed peers in terms of meaningfully reducing balance sheet risk, particularly mortgage-related credit risks and credit card risk. As a result, we believe [Bank of America’s] stock will outperform peers now trading below [tangible book value].”


What do analysts expect?

Wall Street forecasts earnings to come in at $0.48 a share, down from the $0.70 a share seen in the same quarter last year. Revenue is expected to come in at $22.76 billion, down 1.7% from the previous year.


Bank of America's expected revenue



What are the technical levels to watch out for?

The Street last week reckoned Bank of America's share price had been finding resistance at around the $23 level. However, the share price has since cleared that level, closing Monday at $23.92.

With the recent rally, a push to the mid-March high of $25.25 could now be on the cards, with a possible push to $25. The Street puts support between $20.50 to $21, followed by $19.50.


Is Bank of America a buy?

For income-seeking investors, the stock carries a 2.9% forward dividend yield. Although it shouldn't come as a shock if Bank of America suspended payouts given the current economic climate.

An average share price target of $27.10 would see a 13.3% upside. Of the 30 analysts tracking the stock on Yahoo Finance, 22 rate it either a Strong Buy or a Buy.

It almost goes without saying that the total economic effect of the coronavirus is unknown. The rallies banks have seen could be short-lived. A disappointing earnings season and looming recession could see things get worse before they get better. However, for traders in it for the long-haul, now could be the time to buy Bank of America.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Continue reading for FREE

  • Includes free newsletter updates, unsubscribe anytime. Privacy policy

Free ebook

Tricks of the trade: 7 interviews with the world’s top traders

Get it now

Related articles