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On Wednesday, Keefe, Bruyette & Woods analyst Christopher McGratty adjusted the price target for Western Alliance Bancorporation (NYSE:WAL) shares, lowering it to $95 from a previous $110. Despite this change, McGratty maintained an Outperform rating on the stock.
In his remarks, McGratty highlighted the ongoing debate among investors about the value of Western Alliance, noting its current trading at approximately 5 to 4 times the firm’s revised pre-provision net revenue (PPNR) estimates for the years 2025 and 2026. He referenced historical patterns, pointing out that bank stocks have previously hit their lowest multiples during the Global Financial Crisis (GFC) and the COVID-19 pandemic, suggesting that such moments have traditionally been seen as opportunities to purchase. InvestingPro analysis indicates the stock is currently trading below its Fair Value, with a P/E ratio of 8.91x and a notable track record of raising dividends for six consecutive years.
McGratty emphasized the intrinsic value he sees in Western Alliance’s stock, especially considering the bank’s strong capital position. He pointed out that the bank has a fully rebuilt capital position with a Common Equity Tier 1 (CET1) ratio of over 11% and a Return on Tangible Common Equity (ROTCE) of 16%. The bank maintains a solid return on equity of 13% and has remained profitable over the last twelve months, according to InvestingPro data, which offers 8 additional exclusive insights about the company’s financial health.
However, McGratty also noted that investors might need to exercise patience with Western Alliance shares due to the current environment of heightened macroeconomic volatility. This suggests that while the stock holds significant potential value, external economic factors could influence its performance in the short term.
Western Alliance Bancorporation, based in Arizona, is a regional bank holding company providing various banking and related services. The adjustment in the price target reflects Keefe, Bruyette & Woods’ analysis of the company’s projected financial performance and market conditions.
In other recent news, Western Alliance Bancorporation reported its Q1 2025 earnings, which aligned with analyst expectations for earnings per share (EPS) at $1.79 but fell short of revenue forecasts. The bank’s revenue was $778 million, missing the anticipated $791.05 million, highlighting challenges in revenue generation. Despite the revenue shortfall, Western Alliance demonstrated a 12% year-over-year increase in pre-provision net revenue and a 9% rise in net interest income. Additionally, the company’s total assets grew by $2.1 billion from year-end, reaching $83 billion. Analysts from Autonomous and Barclays (LON:BARC) Capital noted the bank’s strong credit quality and its strategic focus on diversified business lines and digital platforms. The bank maintains a positive outlook for 2025, expecting loan and deposit growth and anticipating rate cuts that may impact future earnings. Management emphasized the bank’s adaptability and robust credit quality assessment as key strengths moving forward.
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