Now is not the time for investors to get into shares of Bank of America , according to Keefe, Bruyette & Woods. Analyst David Konrad downgraded the banking giant to underperform from market perform, saying in a Wednesday note to clients that investors are “paying too much for defense” and that the stock trades at a premium to peers. “Although we view BAC as a relatively safe stock, the current premium valuation is expensive for an environment that may face more revenue risk than a severe credit downturn,” he wrote. BAC YTD mountain Bank of America’s 2023 performance Bank of America shares are up more than 10% this year after falling 25.6% in 2022. The uptick in shares follows of a difficult year for the industry amid a tough macro backdrop that forced many to cut expenses and, in some cases, headcount. Along with the downgrade, Konrad trimmed his price target to $33 from $35 a share, suggesting nearly 10% downside from Wednesday’s close price. In its fourth-quarter report, Bank of America topped expectations as higher rates offset some declines within investment banking. According to Konrad, shares look vulnerable after the run-up in shares post-earnings and consensus cuts to PPNR, a profitability measure that accounts for net interest and non-interest income. The stock also trades at a premium to peers despite lower expected returns, and above its historical price-to-earnings multiple. He wrote that the “valuation looks rich, trading at a 5% premium to JPM on PPNR despite lower expected returns and a 16% premium to super-regional banks on P/E compared to a historical 6% discount.” At the same time, Konrad views limited positive catalysts for shares given expectations that the bank is near peak revenues and net interest income. “Growth is the major concern as BAC has lost share in capital markets and is risk-averse in its loan portfolio,” he wrote. — CNBC’s Michael Bloom contributed reporting
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