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2-Star Stocks Poised to Plunge: Bank of America? | The Money Times

Money Matters - Simplified

2-Star Stocks Poised to Plunge: Bank of America?

Based on the aggregated intelligence of 130,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, financial services giant Bank of America (NYSE: BAC) has received a distressing two-star ranking.

With that in mind, let's take a closer look at BofA's business and see what CAPS investors are saying about the stock right now.

BofA facts

Headquarters (Founded)

Charlotte, N.C. (1874)

Market Cap

$70.88 Billion

Industry

Other Diversified Financial Services

Trailing-12-Month Revenue

$57.27 Billion

Management

CEO Kenneth Lewis (Since 2001)

CFO Joe Price (Since 2007)

Return on Equity (Average, Past Five Years and TTM)

12.7% and 3.6%

3-Month Price Change

115%

Competitors

JPMorgan Chase (NYSE: JPM)

US Bancorp (NYSE: USB)

CAPS Members Bearish on BAC Also Bearish on:

Citigroup (NYSE: C)

Wells Fargo (NYSE: WFC)

CAPS Members Bullish on BAC Also Bullish on:

General Electric (NYSE: GE)

Apple

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS. 

On CAPS, 427 of the 2,247 All-Star members who have rated BofA -- or
19% -- believe the stock will underperform the S&P 500 going
forward. Among the entire bearish population are rd80, who is ranked in the top 1% of our community, and CAPSnGAIN.

Last week, rd80 tapped BofA as one of the more wobbly banks to bank on:

[Bank of America] needs to raise $34 billion after
the stress tests. ... An investor buying [BofA] is betting they will
turn the corner and become profitable to the point they can buy the
government shares back. If that plays out, [BofA] becomes a dominant,
possibly the dominant bank in the US. The problem is they've got
competition like [JPMorgan], [Goldman Sachs (NYSE: GS)], [Wells Fargo] and a host of regional banks that are in better shape to grab market share.

In a pitch from two days later, CAPSnGAIN also seemed stressed over BofA's financial footing:

--With a Market Cap of around $70B, and the need to
raise a few more billions in response to the stress tests, it's unclear
to me where they're going to come up with $45B to repay TARP.
--
although Q1 earnings beat expectations, the amount was comparable with
how much Q4 earnings missed expectations, making me wonder how Q2-Q4
will turn out.
-- Analysts keep dropping the 2010 EPS estimates, making the stock more expensive on a future P/E basis.
-- Housing prices haven't started rising, despite this time of year being popular for real estate purchases.

Copyright © 2009 Universal Press Syndicate.


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