We're Boosting Targets for Two Bank Stocks

Our shares of Bank of America BAC and Morgan Stanley MS moved higher yesterday, following better-than-expected quarterly results and favorable outlooks.

Both banks reported strong investment banking and asset gathering, as was telegraphed earlier from JPMorgan JPM, Citigroup C, and Goldman Sachs GS. We can expect this to continue in the second half of 2024, especially as investment banking backlogs rose during the June-ending quarter, with Morgan Stanley specifically calling out its merger and acquisition pipeline. Bank of America reiterated the quarter was the trough for its Net Interest Income (NII) and the bank continues to leverage digital banking, resulting in slower expense growth.

In response, we're now boosting our MS price target to $120 from $110 and our BAC target to $49 from $43. Others across Wall Street are also likely to boost their targets for the two major banks this morning, further lifting the shares. Both stocks are currently overbought, and we would not suggest you chase them at current levels. Because of that, we are inclined to keep both positions ranked as "Twos." But if we see MS drift lower near $100 or BAC near $40, the upside to our price targets could be a factor in revisiting those ratings. As we make these adjustments, we will also lift our corresponding panic points to $90 and $36 for MS and BAC shares, respectively, from $83 and $33.

BofA recently announced an 8% quarterly dividend increase to $0.26 per share following Fed bank stress tests, while Morgan announced it will boost its to $0.925 per share. Both of these increases will be reflected in third-quarter 2024 dividend payments, the dates for which have yet to be announced. Once we have them, we will share those dates with you.

New Coverage for Axon

A bit out of the blue, but we’ll take the new research coverage on our shares of Axon AXON from Jefferies and BofA. BofA calls Axon the "premier safety technology ecosystem provider" and finds it has a "commanding lead" to capture growing global spending on public safety. Alongside those rosy comments, BofA’s price target is $380. With its "Buy" rating and $385 target, Jefferies shared its view Wall Street underestimate the company’s software platform opportunities.

We agree with those comments and continue to see Axon’s business mix shifting further to the higher-margin, recurring cloud segment. That in turn should foster earnings per share growth in a favorable public safety spending backdrop. As the 2024 presidential election heats up, we will monitor comments on public safety spending, but coming off the weekend’s shooting of former President Trump, we expect both sides will redouble their public safety message.

Following their recent surge to $319 from the low $290s, Axon shares are on the cusp of being overbought. Today’s new coverage discussed above could tip them into being overbought. Following that pronounced move and with the S&P 500 overbought as well, our advice for members is to not chase AXON shares here. Rather, a pullback closer to $308 where there is a gap in the chart could bring a more favorable entry point for newer members.

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At the time of publication, TheStreet Pro Portfolio was long BAC, MS and AXON.