Western Alliance stock target cut by $7, retains buy rating

On Monday, DA Davidson adjusted its outlook on Western Alliance (NYSE:WAL) Bancorporation (NYSE: WAL), lowering the price target to $78 from the previous $85 while maintaining a Buy rating on the stock. The firm's analyst cited the bank's current valuation and recent financial maneuvers as key factors in this decision.

The analyst noted that Western Alliance's shares are currently trading slightly below the estimated tangible book value (TBV) for 2025, which is projected at $58.16, and also below seven times the revised 2025 earnings per share (EPS) estimate. These metrics suggest that the shares are attractively valued at present.

Western Alliance has recently completed a strategic financial process, which included increasing its Common Equity Tier 1 (CET1) capital ratio to 11% and lowering its loan-to-deposit ratio to the mid-80% range, specifically 81% as of March 31. These steps have strengthened the bank's capital structure and liquidity position.

According to the analyst, the bank's improved capital and balance sheet composition have positioned it well for future growth, particularly in its loan portfolio. This is expected to support a positive outlook for net interest income (NII) going forward, as the bank can now focus on expanding its lending activities.

Looking ahead, the analyst believes that Western Alliance is on track to surpass $100 billion in assets. This milestone is viewed as a significant achievement for the bank, reflecting its potential for continued growth and financial success. The revised price target of $78 reflects the analyst's confidence in the bank's strategy and market position, while still recommending the stock as a Buy.

Western Alliance Bancorporation (NYSE: WAL) has shown a notable performance in the financial markets, with a significant price uptick of 37.93% over the last six months, indicating strong investor confidence. This aligns with the DA Davidson analyst's optimistic view and the maintained Buy rating, despite a lowered price target. The bank's commitment to shareholder returns is evident from its consecutive dividend increases over the past five years, a reassuring sign for income-focused investors. Additionally, Western Alliance Bancorporation's profitability is not in question, with analysts predicting the company will be profitable this year and a track record of profitability over the last twelve months.

Investors may find the current Price/Earnings (P/E) ratio of 8.13 and the slightly higher adjusted P/E ratio for the last twelve months as of Q1 2024 at 8.78 to be attractive, suggesting the stock is reasonably valued relative to its earnings. The company's revenue growth also remains robust, with an 11.37% increase over the last twelve months as of Q1 2024, and an even more impressive quarterly revenue growth of 34.01% in Q1 2024. However, it's worth noting that some caution may be warranted, as 8 analysts have revised their earnings downwards for the upcoming period, and the company suffers from weak gross profit margins.

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For those looking to delve deeper into Western Alliance Bancorporation's financials and future prospects, more InvestingPro Tips are available at: https://www.investing.com/pro/WAL. Remember to use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of insights, including several additional tips listed in InvestingPro, to inform your investment decisions.

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