UPDATE: Citi Upgrades Bank of America (BAC) to Buy (JPM)

January 2, 2014 6:36 AM EST Send to a Friend
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Price: $17.62 +0.51%

Rating Summary:
    18 Buy, 11 Hold, 4 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 14 | Down: 28 | New: 51
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(Updated - January 2, 2014 10:24 AM EST)

Citi upgraded Bank of America (NYSE: BAC) from Neutral to Buy with a price target of $19 (from $16). Analyst Keith Horowitz also sees value in JPMorgan Chase & Co. (NYSE: JPM) and raised its price target to $72 (from $66).

"We believe BAC has built-in earnings drivers on the cost side which puts us slightly ahead of consensus. Also, if US economy continues to improve, we believe investors will look to BAC (as well as JPM) as a play on the US economy due to an asset sensitive balance sheet and exposure to the US consumer. We see similar value in JPM, and are raising the target price to $72 with an expected total return of 27%. We expect JPM to beat modestly in 4Q13 and BAC to report in-line results for 4Q," said Horowitz.

"We expect BAC to continue to meet expense save targets going forward and the lower execution risk will result in potential upside to the valuation. We estimate the market implied cost of equity for BAC at 11.7%, which is a beta of 1.29 (based on a 1.5% risk-free rate and 7.5% cost of equity.) Assuming a decline in the Beta of 1.25 due to lower execution risk would result in a cost of equity of 10.9%, putting our target price at $19," added the analyst.

Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) remain Neutral as management's ability to drive returns appears priced in. Targets were raised to $195 and $35. Lazard (NYSE: LAZ), also Neutral, had its price target raised to $46 from $37.78.

For an analyst ratings summary and ratings history on Bank of America click here. For more ratings news on Bank of America click here.

Shares of Bank of America closed at $15.57 yesterday.


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