Bank of America stock has come under pressure in the past two months, mirroring the performance of most banks in the US. After peaking at $65.07 in August, the stock pulled back to $54.58. This retreat will now be put to the test as the company publishes its financial results on Wednesday.
Bank of America earnings preview
BoFA, the second-biggest bank in the world, has had a good year, helped by the elevated interest rates and activity in the investment banking division. Recently, however, the two main catalysts have impacted its business, with high interest rates derailing the investment banking division. Trading activity has also softened a bit.
The last earnings result showed that Bank of America’s revenue rose by 15% to $31.6 billion. This growth was driven by its consumer banking division, which made over $11.3 billion in the second quarter. It generated over $3.3 billion in net income during the quarter.
Its global wealth and investment management division made over $6.9 billion in Q2, up by 16% from the same period last year. The surge was because of higher asset management fees and higher market valuations. Its global banking and markets divisions also made some modest revenues.
Yahoo Finance data shows that analysts expect that Bank of America’s revenue rose by 8.7% in the third quarter to $30.54 billion. By division, there is a likelihood that its investment banking division’s revenue dropped in the quarter.
Data compiled by Dealogic shows that its investment banking division made $5.5 billion this year, making it the fourth-biggest players after JPMorgan, Goldman Sachs, and Morgan Stanley.
The company’s earnings-per-share (EPS) is expected to come in at $1.1, up modestly from the $1.06 it made last year.
Options market predicts modest activity after earnings
Traders in the options market tend to be modestly volatile. That is in line with how it trades after releasing its earnings report. For example, its stock rose by less than 3% after releasing its earnings report in July. It also dropped by about 3% after its previous earnings report.
The options market shows that the company has a put/call ratio of 0.27, meaning that it has more calls than puts. Most of its call options are concentrated at $57, with the volume and open interest being 9,366 and 19,829, respectively. Such a move would be a 5% jump from the current level.
Bank of America stock price technical analysis
BAC stock chart | Source: TradingView
The weekly chart shows that BAC stock has slumped in the past few weeks, moving from a high of $65 in August to the current $54.58. A closer look shows that it formed a small hammer candlestick pattern, which is made up of a small body and a long lower shadow.
The stock has moved to the 23.6% Fibonacci Retracement. It has also jumped above the 50-week moving average. Therefore, the stock will likely bounce back, potentially to the psychological level of $60.
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