close icon

Bank of America Deserves a Higher Valuation

Bank of America is having a great year so far. The mega bank beat earnings and revenue estimates in the first quarter and was one of the top performers during the Fed’s recent stress test, which allowed it to boost its dividend by 25% and further support its share buyback program. In addition, the company is expected to deliver $2.53 earnings per share this year – 38% higher than 2017. That is Bank of America the business. Bank of America the stock is a different story.

BAC reached $33.05 in mid-March and has been in pullback mode ever since, losing almost 15% as of last week. There seems to be a divergence between the optimistically looking fundamentals and the market price, which is not at all surprising, since these two go hand in hand just as much as they don’t. This means that either the fundamentals are painting an unrealistically rosy picture or the stock is undervalued and the bulls have some catching up to do. To find out which of these two assumptions is correct, let’s take a look at Bank of America’s current decline from an Elliott Wave point of view on the 30-minute chart below.
bank of america stock elliott wave analysis
The chart visualizes BAC’s drop from $33.05 to $28.01 so far. Its wave structure suggests that a simple A-B-C zigzag correction has been in progress since March 12th. First, there is a textbook five-wave impulse in wave A, labeled 1-2-3-4-5, where the sub-waves of wave 3 are also clearly visible. Then there is an expanding flat correction in the position of wave B, whose waves (a) and (b) are double zigzags, labeled w-x-y. And finally, an ending diagonal wave C appears to be in its final stages right now.

If this count is correct, we should expect a slight dip below the $28 mark in wave 5 of C to occur as early as this week, followed by a sharp bullish reversal. According to the theory, once a correction is over the larger trend resumes. BAC was clearly in an uptrend prior to this A-B-C retracement, so targets above $33.05 are still very reasonable. It looks like the Elliott Wave principle and the fundamentals agree that Bank of America deserves a higher valuation.

Did you like this analysis? Learn to do it yourself with our eBook Elliott Wave guide!



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Stock Split Did Not Change The Trade Desk ‘s Pattern

Ten months ago, in March, 2021, we wrote that The Trade Desk stock can “exceed $1000, but not by much.” Shares were hovering around $750 at the time and, in our opinion, were extremely overvalued. Nevertheless, our Elliott Wave analysis suggested more upside ahead, before the bulls gave up. On June 17th, the company executed…

Read More »

SNAP ‘s Gains Disappear Just as Quickly as Messages

Snapchat is famous for deleting all messages sent over the platform immediately after they’ve been viewed by the recipient. And while this feature is appreciated by the company’s core demographic, investors hardly like it when their SNAP stock gains do the same. Unfortunately, that is exactly what has been happening since late-September. SNAP stock is…

Read More »

Etsy Stock Rose and Fell as Elliott Wave Predicted

Sales at online marketplace giant Etsy are on track for a 33% gain in 2021 and are expected to add at least 20% more in 2022. The company is growing, profitable and financially stable, yet the stock is down 46% from its November 2021 record of $307.75 a share. Fortunately, Etsy ‘s crash is not…

Read More »

Lululemon Stock – Ahead of the Disappointment

Even though the stock recouped most of yesterday’s losses, Lululemon still disappointed investors with its Q421 guidance. Despite causing a milder illness, the Omicron variant is nevertheless taking its toll on the company’s sales. However, shares have been dropping for quite some time now. The stock is down 28% from its $486 all-time high reached…

Read More »

The Top Might Be In for OneWater Marine Stock

Contrary to common sense, the tough times brought by the pandemic caused a dramatic demand for luxury items. Everything from jewelry to mansions experienced a huge surge in popularity. Recreational boats were no exception. In this respect, few companies benefitted more from the post-pandemic boom than OneWater Marine Inc. The company is a fast-growing premium…

Read More »

Hess Corp. to Enjoy the Looming Energy Deficit

The world has finally awakened to the looming climate change catastrophe and is suddenly rushing its way towards renewables. New oil and gas exploration projects are hardly being approved, while the world is still heavily-dependent on fossil fuels. This threatens to create a huge supply-demand imbalance, which can result (already results?) in much higher energy…

Read More »

Okta Stock Likely to Halve Once It Exceeds $300

Founded in 2009, Okta Inc. is an identity management platform provider for businesses. Its products include API access management, single sign-on, multi factor authentication, user management and lifecycle management. It all sounds very impressive and the company’s $36B market cap makes it sound even more so. Until one finds out that Okta is still a…

Read More »

More analyses