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Why UBS Thinks Western Alliance (WAL) Is the Best Bank Stock to Buy Now

  • Western Alliance (WAL) stock has been incredibly volatile, up 15% on Wednesday but still down 50% over the last week.
  • Shares are currently up almost 400% from this week’s low, as volatility in regional banks persists.
  • UBS analysts are bullish on the name, assigning a “buy” rating and an $85 price target.
WAL stock - Why UBS Thinks Western Alliance (WAL) Is the Best Bank Stock to Buy Now

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What a chaotic couple of days it’s been for Western Alliance Bancorp (NYSE:WAL) and regional banks in general. The SPDR S&P Regional Banking ETF (NYSEARCA:KRE) is down slightly today, off about 2%, while WAL stock is soaring, up more than 15% at the moment.

A 2% dip may not seem like a “slight decline” for some investors. However, considering that the exchange-traded fund (ETF) cratered 31.1% from last week’s high to the week’s low. So yes, a 2% move is mild for the moment.

As it relates to Western Alliance, the stock has been extremely volatile due to the failure of SVB Financial (NASDAQ:SIVB).

WAL stock fell 12.8% on Thursday and 20.9% on Friday. It declined each day last week and closed lower by 35% for the week. At its low, shares were down 60% before a large bounce. But that was nothing.

Over the weekend, Signature Bank (NASDAQ:SBNY) failed too, causing even more selling pressure. WAL stock opened lower by more than 73% on Monday, and at the low, shares were down more than 84%. By the close, shares had rallied 250% off the session low but were still down 47% on the day. That is some extreme volatility!

Now UBS is recommending it as a buy?

UBS Rates WAL Stock as a Buy

On Wednesday, UBS initiated coverage of 19 mid-sized banks. Among its ratings, WAL stock was on the list with a “buy” rating. However, not just on the list, Western Alliance was at the top of the list.

UBS analyst Brody Preston explained, “We view WAL’s exposure to more volatile tech/ innovation deposits as manageable, and believe the company’s credit profile is fundamentally misunderstood.”

Along with the rating, the analysts assigned an $85 price target. WAL stock hasn’t traded at or above $85 since August. The target implies roughly 185% upside from the most recent close.

While that price target may seem high, it’s in the ballpark of other analysts’ too. The consensus price target for Western Alliance stock is roughly $82 from the analyst community.

While the UBS analysts argue that the company’s earnings are being mispriced, volatility can be both a big opportunity and a big risk. While we may see big gains in WAL stock, there’s always the risk that big price swings will persist in the stock price, particularly in the short term.

The latest drama from the European banks only adds to the potential price swings.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

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