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On Friday, BofA Securities analyst Ebrahim Poonawala upgraded Toronto-Dominion Bank (TSX:TD:CN) (NYSE: TD) stock rating from Neutral to Buy and increased the price target to C$92.00, up from the previous C$78.00. The upgrade reflects a growing confidence in the bank's potential for improved profitability under the new leadership of CEO Raymond (NS:RYMD) Chun, who will assume his role on February 1. The bank, with a market capitalization of $100.7 billion, has maintained a FAIR financial health score according to InvestingPro analysis.
Poonawala cited the anticipated resolution of the U.S. AML (Anti-Money Laundering) issues and the bank's progress towards profitability as key factors for the upgrade. The new price target is based on 12 times the projected 2025 earnings per share, compared to the 13.3 times earnings multiple of its closest competitor, Royal Bank of Canada (RBC). Currently trading at a P/E ratio of 17.32x, InvestingPro analysis suggests TD Bank is trading below its Fair Value, presenting a potential opportunity for investors. Additionally, the target is set at 1.5 times the year-end 2025 book value, a revision from the previous 10 times earnings and 1.3 times book value estimates.
The analyst's price objective suggests a 15% upside potential for Toronto-Dominion Bank stock, which, when combined with a 5.3% dividend yield, indicates a 20% total return potential. Notably, InvestingPro data reveals TD has raised its dividend for 14 consecutive years and maintained payments for an impressive 53 years, demonstrating strong commitment to shareholder returns.
Despite the uncertainties that remain, Poonawala believes that the market has already factored in the downside risks. He points out that Toronto-Dominion Bank's stock is trading at 10.2 times its projected 2025 earnings, which is lower than the 13.3 times earnings multiple of RBC and the 11.7 times peer median.
The analyst's optimistic outlook is further supported by the comparison to the bank's average return on equity (ROE) forecast for fiscal years 2025 to 2027, which is 12%. This figure stands in contrast to the over 16% ROE target previously set by management, which was suspended in November. Poonawala's analysis suggests that the current stock price does not fully reflect the bank's potential for improved execution going forward.
In other recent news, Toronto-Dominion Bank (TD Bank) has been the subject of various analyst adjustments. BMO Capital upgraded the bank's stock from Market Perform to Outperform, citing a potential 25% return for investors, while Jefferies upgraded its rating from Hold to Buy, naming TD Bank a top pick for 2025. Conversely, Scotiabank (TSX:BNS) downgraded TD Bank's stock from Sector Outperform to Sector Perform, and RBC Capital reduced its price target to $77.00.
These revisions follow TD Bank's recent earnings report, which showed a decrease in Q4 earnings per share to C$1.72, missing the consensus estimate of C$1.83. However, the bank exceeded revenue expectations, reporting C$15.51 billion, a 33% rise year-over-year, surpassing the projected C$12.71 billion.
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