BofA Securities has affirmed its optimistic stance on East West Bancorp (NASDAQ: NASDAQ:EWBC), maintaining a Buy rating while increasing the price target to $110 from $99.
The decision follows East West Bancorp's third-quarter 2024 earnings report, which showed the company outperforming estimates with an operating earnings per share (EPS) of $2.09.
This figure surpassed both the BofA and consensus estimates of $2.03 and $2.06, respectively. Additionally, the bank has sustained its full-year 2024 guidance.
The upgrade in the price target is attributed to revised upward earnings estimates for the fourth quarter of 2024 and the full year 2025, by 3.8% and 0.8% respectively.
The revisions were prompted by a more resilient net interest margin and slightly improved fee revenue growth expectations. The new price target also incorporates an updated price objective methodology that takes into account projections for fiscal year 2026, aiming to represent a more normalized EPS environment, said a BofA analyst.
The valuation approach used to determine the new price target combines a 50% price-to-earnings (P/E) ratio and a 50% price-to-tangible book value (P/TBV) ratio, evenly weighted between fiscal years 2025 and 2026 estimates. The multiples assigned are 13 times and 12 times for the P/E ratio and 1.8 times and 1.6 times for the P/TBV ratio, respectively.
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