Western Alliance Bancorp Still In Buy Range After Breakout
Western Alliance Bancorp (NYSE: WAL) broke out of a five-month base on September 28, clearing a buy point above $109.84. Earnings and sales growth have been accelerating in recent quarters....
Western Alliance Bancorp (NYSE: WAL) broke out of a five-month base on September 28, clearing a buy point above $109.84. The stock has several things going for it right now. Earnings and sales growth have been accelerating in recent quarters, and analysts have boosted their ratings and price targets on the stock.
Western Alliance is a holding company for regional banks in Nevada, Arizona, and California. Its brands include Alliance Bank of Arizona, Bank of Nevada, Bridge Bank, First Independent Bank, Torrey Pines Bank, Alliance Association Bank, and AmeriHome Mortgage.
It closed the deal to acquire AmeriHome in April, in a transaction valued at approximately $1.22 billion.
Certain banking sub-industries within the broader financial sector have been top performers. Western Alliance is part of the sub-industry of regional banks in the west and southwest. That particular group is home to other top performers including Silvergate Cap, Triumph Bank, PCB Bancorp, Pacwest, and Bank7 (BSVN).
Regional Banks Outpacing Large-Cap Sector
This sub-industry group is up 35% year-to-date, slightly ahead of the S&P large-cap financials sector, which has advanced 32.36% this year.
Western Alliance has a market capitalization of $11.71 billion, putting it at that juncture between mid-cap and large-cap. Technically, a mid-cap is a stock with a market cap between $2 billion and $10 billion, but with the strong market rallies in the past two years, many stocks grew out of their original classifications.
This stock is definitely an example of one that's shown big price appreciation recently. It's advanced 88.82% year-to-date and 204.56% in the past 12 months.
Profitability has grown in each of the past seven years.
Revenue accelerated in the past two quarters, from 7% to 57% most recently. Earnings growth accelerated in the past three quarters, from 10% to 146% in the quarter ended in June.
Those are turnarounds on the top and bottom lines, following slowdowns in 2020.
In early August the company said it would increase its quarterly dividend to $0.35 per share. Its current yield is 1.2%.
Analysts pegged earnings at $8.52 per share for the full year, a year-over-year gain of 69%. In 2022, that's expected to come in at $9.29 per share, up 9%.
Western Alliance is slated to report its third-quarter on October 21 after the close. Analysts expect earnings per share of $2.23 per share on revenue of $530.73 million. Both would mark year-over-year increases.
Exceeding Analyst Expectations
According to data compiled by MarketBeat, Western Alliance has a long history of topping analysts' views.
In the most recent quarter, the company beat earnings views by $0.15 per share. It also exceeded revenue views.
Analysts' consensus rating on the stock is a "buy" with a price target of $95, a 15.44% downside.
Is there a risk of buying a stock that analysts expect to decline, despite a buy rating?
In this case, and in many others, analysts are evaluating the near-term prospects in light of the recent rally.
The recent consolidation is categorized as a second-stage base. That's potentially very constructive, particularly if the broad market resumes an uptrend. First and second-stage bases often have a higher likelihood of success than breakouts from earlier or later stages. That's because institutional money is just beginning to come into the stock, and there's less probability that funds, banks, insurance companies, university endowments, and others will opt to take profits after a lengthy rally.
Western Alliance has notched some strong three-year growth rates in the following areas:
- Revenue: 14.06%
- Net income: 15.89%
- Diluted EPS 17.59%
Is the stock currently a buy?
Shares closed Friday at $112.35, up $0.98 or 0.88%. Trading volume was below average.
Western Alliance is still in the buy range, as it's about 2.3% above its buy point near $109.84. However, broad market uncertainty could easily take the stock down again. That's the biggest concern with any buy at this point. If investors want to ahead and enter stocks, they must use caution and be ready to cut losses fast if their stock turns south quickly.