Wedbush is upgrading Western Alliance Bancorp to outperform from neutral and adding it to its best ideas list after earnings showed it in a solid position just a month after the collapse of Silicon Valley Bank sent turmoil through the regional banking sector.
(Bloomberg) — Wedbush is upgrading Western Alliance Bancorp to outperform from neutral and adding it to its best ideas list after earnings showed it in a solid position just a month after the collapse of Silicon Valley Bank sent turmoil through the regional banking sector.
Shares of Western Alliance surged 24% Wednesday, the largest one-day jump since 2008, following the bank’s better-than-expected earnings. Wedbush is also adding Regions Financial Corp., M&T Bank Corp. and New York Community Bancorp Inc. to the list, where they join the ranks of other outperform-rated stocks Apple Inc., Microsoft Corp. and Palo Alto Networks Inc.
“Deposit outflows in March have partially reversed and WAL’s higher level of insured deposits at 73% should help support deposit levels going forward,” analysts led by David Chiaverini wrote in a note. He added that his buy-equivalent rating is based on the expectation that high insured deposits will help Western Alliance “successfully navigate through this turbulent time.”
Western Alliance was among the hardest hit banks during last month’s selloff when a run on deposits put it at risk of collapse. Shares, through Tuesday’s close, were down more than 45% year to date. But its valuation has grown compelling, Wedbush said, given its performance, solid outlook for deposit growth and prudent liquidity measures.
Wedbush — which is watching insured deposit rates closely — also added Regions Financial to its best ideas list because, in addition to having a strong deposit franchise, 75% of its deposits are insured or collateralized, the highest of its regional bank peers.
Outside of financial institutions, Wedbush also added Netflix Inc. to the best ideas list following its own mixed earnings release, which the firm sees underscoring its ability to generate more free cash flow than its guidance suggests.
“Netflix is well-positioned in this murky environment as streamers are shifting strategy, and should be valued as an immensely profitable, slow-growth company,” Wedbush said, reiterating its outperform rating on shares.
(Updates stock move)
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