Is $13 the New Ceiling for Bank of America?
Bank of America had a pretty decent week, relatively speaking. It was boosted earlier in the week when news of a settlement with MBIAreached the markets, and even some threatened legal action by the state of New York didn't affect it all that much. Even Friday morning, with Citigroup and JPMorgan Chase relatively flat, Bank of America remains slightly higher.
Meeting resistance
It was a little less than two weeks ago that my colleague John Grgurich wondered if Bank of America would remain closer to $10 than not. Obviously, it seems to have pushed past this threshold, but it seems to be meeting resistance around $13 a share. Granted, it is only in the past couple of days that the stock has traded above this level, but there has been numerous times over the past few months where it has approached, but not exceeded, this price:
What does it mean?
In general, we at the Fool believe that daily stock price movements are unimportant unless there is some news surrounding the move. With a stock that gets as much coverage as Bank of America, however, sometimes it's important to see if there are any reasons why it's not moving and where it could ultimately end up.
As anyone that follows Bank of America knows, it is currently trading at a steep discount to book value, and a slight discount to tangible book value. Among the Big Four banks, Bank of America "wins" the price/book value battle, while Citigroup barely beats B of A in the price/tangible book value fight:
Company | Book Value per Share | Tangible Book Value per Share | Price/Book Value | Price/Tangible Book Value |
|---|---|---|---|---|
Bank of America | $20.30 | $13.46 | 0.64 | 0.97 |
Wells Fargo | $28.27 | $23.30 | 1.36 | 1.65 |
JPMorgan Chase | $52.02 | $39.54 | 0.96 | 1.26 |
Citigroup | $62.51 | $52.35 | 0.78 | 0.94 |
Source: 2013 First Quarter filings; prices as of May 8, 2013.
Based on its book value alone, there seems to be plenty of room for Bank of America to grow. However, the consensus analyst estimate is currently $12.87, meaning it is trading just north of what the "experts" seem to think. Personally, I think the true value of the bank lies somewhere between its book value and tangible book value, so it's only a matter of time before it manages to leave $13 solidly in its rearview mirror as it heads toward these heights.
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The article Is $13 the New Ceiling for Bank of America? originally appeared on Fool.com.
Fool contributor Robert Eberhard has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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