Since early October, Bank of America (NYSE:BAC) stock has suddenly come to life. Consider that the return of BAC stock over the last month is nearly 12%. And in 2019, the BAC stock price is up 35%.
But whenever a large company in a mature industry has a strong rally, it can be tough for it to maintain its momentum. And over the past few years, BAC stock price has been somewhat choppy.
But over the long-term, I think Bank of America stock can still rise significantly. If anything, it does look like Wall Street is warming up to banks again because of their relative stability.
Granted, the nagging problem of low interest rates is still an issue. Low rates are squeezing the bank’s net interest income, which is the difference between the interest it earns on loans and the cost of its deposits.
But there are some things to keep in mind about that. First of all, the Federal Reserve ‘s rate cuts appear to be over, since the U.S. economy has remained fairly steady.
Also, BAC has a diverse set of revenue streams, as it earns money from wealth management, investment banking and mortgage lending. Additionally, the company’s core lending business has been showing lots of traction lately. For example, the bank’s loans to small and medium-size businesses rose 7% year-over-year in Q3, hitting $15.2 billion.
Bank of America’s Innovations
The use of the words “Bank of America” and “innovation” in the same sentence sounds kind of odd , right? But it’s worth noting that Bank of America has been investing substantial amounts of money on new technologies and systems. And those initiatives are showing lots of traction.
Consider the following metrics:
- BAC has 38 million active digital banking users and 28.7 million of them are mobile 52% of its digital sales come from mobile devices.
- About 40% of its consumer mortgage applications come from digital sources.
- Roughly 60% of its total auto financing applications come from Zelle, its digital payments network.
The good news for BAC stock is that innovation looks to be a part of the company’s DNA – and that is likely to help accelerate its growth.
Just look at the bank’s recent deal with IBM (NYSE:IBM). BAC will use the tech company’s infrastructure technologies and services to build a public cloud platform. BAC certainly understands the security risks of such a platform and has taken actions to minimize them, through a seven-year process.
By embracing the cloud, BAC should lower its costs, as there will be less need to build and maintain data centers. Additionally, centralized data should yield better analytics and even enable the bank to use artificial intelligence, improving BAC’s results and boosting BAC stock.
According to the bank’s press release: “[This] is the only industry-specific public cloud platform that can provide preventative and compensatory controls for financial services regulatory workloads, multi-architecture support and proactive and automated security, leveraging the industry’s highest levels of encryption certification.”
The Bottom Line on BAC Stock
Since taking the CEO spot in 2010, Brian Moynihan has shown that he is a capable leader. He has not only dealt with the horrible impact of the financial crisis, but he has been able to rethink this company, especially when it comes to cutting-edge technologies.
In the meantime, BAC stock price still remains at reasonable levels, with the shares’ forward price-earnings ratio standing at about 11. Its dividend yield is a decent 2.15% and will likely keep increasing in coming years. So all in all, BAC stock looks like a a stable investment that offers some growth.
Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.