Bank of America Corp. (NYSE:BAC) stock is going to $30. It likely won’t happen in the next month or two, but BAC stock will hit $30 before the end of 2017.
It’s a bold statement, for sure. A $30 PT would mean a roughly 25% jump from current prices. But we are already seeing signs that the Trump administration is delivering on key campaign promises that specifically benefit the banking industry, including relaxing regulations on the financial industry and sounding the death knell for the Dodd-Frank Act — all of which is a boon for BAC stock.
What’s more, interest rates are moving higher — sooner rather than later. Many pundits on Wall Street claimed another rate hike wouldn’t arrive until late 2017, at the earliest, because economic growth wouldn’t allow the Federal Reserve that much leeway.
But jobs data and other reports have indicated exactly the opposite. So much so that Fed Chairwoman Janet Yellen told the Senate Banking Committee yesterday that rates could be rising sooner rather than later. In fact, Yellen told the committee that a March rate hike was definitely “on the table.”
Another rate hike this soon would be music to BofA traders’ ears, as it means higher revenue. And Bank of America stands to gain much more from this than peers like JPMorgan Chase & Co. (NYSE:JPM) and Citigroup Inc (NYSE:C). Specifically, BofA has a much heavier focus on U.S. consumers than its competitors, and the banking giant has rather large holdings in rate-sensitive mortgage securities. This means Bank of America’s fortunes are much more closely tied to U.S. interest rates.
The next two-day policy meeting for the Federal Open Market Committee is slated for March 12-14, and BAC stock traders should be ready to take advantage of a melt up in sentiment for the shares.
One of the biggest potential sentiment drivers for BAC stock comes from the analyst community. Yes, the brokerage bunch is already quite keen on Bank of America, with Thomson/First Call reporting that 24 of the 33 analysts following the stock rate it a “buy” or better.
But the upside potential comes from the 12-month consensus price target, which rests at $24.86 — just 3.3% north of BofA’s current perch. With rates and Bank of America’s revenue set to rise, price-target increases should be in the stock’s future.
BAC options traders are already preparing for a continued rally, with a focus on a positive outcome from the March Fed meeting.
And that’s where I’m eyeballing a pair of trades.