Is Bank Of America Stock A Good Long-Term Investment? (NYSE:BAC)

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Investment thesis

Bank of America’s (NYSE:BAC) high asset sensitivity positions it well to benefit from the rising interest rate cycle. The company also has strong loan growth prospects as its loan growth has lagged deposit growth since Covid and there is a good chance to catch up. There is a short-term headwind as the company is planning to discontinue its overdraft charges which will result in a $1 billion hit for the topline. But I believe, in the long term, it will make the company more competitive and thus attract more consumers. Further, its impact will be much lower compared to the impact of investments that some of its global banking peers like JPMorgan Chase & Co. (JPM) are making, and BAC should see a swift recovery in EPS in FY23 and beyond. The stock is trading at 13.32x FY22 EPS estimate and 11.41x FY23 EPS estimate and I believe it is a good buy at the current level given its strong long-term growth prospects.

Last Quarter Earnings

Earlier this year, Bank of America Corporation reported fourth-quarter results for the period ending Dec 31, 2021, with total revenue, net of interest expense rising 10% year over year from $20 billion to $22.1 billion, owing to an increase in both net interest income and non-interest income. Strong deposit growth and investment of excess liquidity boosted net interest income (NII) by 11% year over year from $10.25 billion to $11.41 billion. Non-interest income increased by 8% year over year due to an increase in asset management fees and investment banking revenue. Better asset quality and macroeconomic improvements helped in releasing $489 million in the provision of credit losses. Non-interest expenses increased 6% to $14.7 billion because of higher revenue-related incentive compensation partially

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Is PayPal Stock A Good Long-Term Investment? Why I Finally Bought The Stock

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PayPal (PYPL) stock has been crushed since releasing fourth quarter earnings, continuing a slide that has left the stock trading at a fraction of where it was trading only several months ago. The company guided for a steep slowdown in growth in 2022, but growth is expected to accelerate as it moves beyond struggles related to eBay (NASDAQ:EBAY). The company is buying back stock and with the valuation at a low 24x earnings, the share repurchase program may play an increasingly important role moving forward. I rate the stock a strong buy as I have finally purchased the stock myself for my portfolio.

How Did PYPL Stock Do In 2021?

PYPL started 2021 with strength, at one point trading up 30% for the year. The stock tumbled as it closed the year, and continued falling. The stock is now down over 60% from recent highs:

Chart

YCharts

The tumble appears to be due to conservative guidance for 2022, but with the stock trading at 24x earnings, it is worth buying here.

What Is PayPal Stock’s Price Target?

In spite of the steep fall, Wall Street analysts remain optimistic for the stock’s forward prospects. The average rating is 4.27 out of 5, a solid buy rating.

Wall Street PayPal Ratings

Seeking Alpha

The average price target is $182.54, representing a 60% potential upside.

PayPal Price Target

Seeking Alpha

It is unusual for the consensus price target to represent so much upside for a high-quality stock like PYPL which is flowing cash with solid growth ahead of it. Let’s dig deeper to understand why the stock has fallen but more importantly, why I see great upside ahead.

PYPL Stock Key Metrics

PYPL continued to grow its active accounts base, albeit at a decelerating rate.

PayPal Active Accounts

PayPal 2021 Q4 Presentation

The company expects further pressures as

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