Bove's Bank of America Call Confusing To Bulls & Bears (BAC)

Bank of America Corporation (NYSE: BAC) is having a hard time finding its footing this morning.  Rochdale Securities’ Dick Bove has a research note that is leaving investors and traders scratching their heads.  Bove, one of the top banking analysts, argued that the banking giant may set aside as much as $46 billion for loan loss provision in 2009.  He called the losses “horrific.”  But the research call was almost as equally confusing to the bulls and the bears since Bove lifted his price target and maintained a “Buy” rating on the stock.

When you see words like “horrific” and increasing loan loss reserves, it seems odd when you also see a price target raised.  But Bove simultaneously raised his price target by $5.00 to $19.00 as his confidence in management and the company is improving.

Bove even went as far as calling the Merrill Lynch and Countrywide acquisitions as “positive” for the bank’s future position.  Bove now also believes that the calls to ouster Ken Lewis as CEO will begin to quite down.  A rise of 400% from the bottom sure seems to change the mood.  Lastly, Bove believes that the insolvency calls were never accurate and that is part of his thesis for raising his target so much.

Despite the negative points in the call, this $19.00 price target leaves an implied upside of about 40% from the 3% drop to $13.30 this morning.  This follows two days of gains as shares closed up $0.99 at $12.97 on Thursday and closed up $0.75 at $13.72 on Friday.

Jon C. Ogg
June 15, 2009