Is Bank of America (BAC) Stock’s Valuation Justified After New Alts Program and Tokenization Push?

If you’re trying to decide what to do with Bank of America (BAC) stock after the latest headlines, you’re not alone. The company has just launched the Alts Expanded Access Program through Merrill Wealth Management and its Private Bank, rolling out exclusive access to private market funds for clients with at least $50 million in net worth. This isn’t just a new product; it is a direct response to surging demand from ultra-high-net-worth investors, especially among a younger demographic hoping to branch out beyond the usual equity and bond strategies. At the same time, Bank of America is doubling down on research around tokenized assets, making the case that blockchain-enabled mutual funds could drive the next industry shift.

It is not too surprising, then, that momentum around Bank of America has picked up over the past year, as the stock has delivered a 28% total return and posted double-digit gains year-to-date. Besides these launches in asset management, management shake-ups and recent bond offerings have kept things interesting for shareholders. Still, the real question is whether the current optimism is based on real change or simply riding a wave of risk-seeking behavior across the sector.

After a year of strong gains and high-profile strategy shifts, is Bank of America stock trading at a discount, or are investors already factoring in all the growth these moves could generate?

Most Popular Narrative: 14.1% Overvalued

According to the narrative by StjepanK, Bank of America is currently seen as overvalued by 14.1% when measured against the author’s discounted cash flow estimate of fair value.

I forecast net interest income growth of 2.0% per year, supported by higher interest rates and loan growth. Non-interest revenue is expected to grow at 1.5% annually, driven by fee income and investment banking activities. Operating expenses are projected to decline by 1.0% per year due to efficiency improvements and digital transformation. This results in pre-tax income growing at 4.0% annually through 2030.

Ready to peek behind the curtain of this hotly debated valuation? The biggest surprises come from bold assumptions about the bank’s future revenue engine and just how much efficiency magic the management can pull off. Want to know if legacy banking can reinvent itself enough to warrant this rich price tag? Dive in and see which numbers could make all the difference.

Result: Fair Value of $43.34 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, a sharp economic downturn or a sudden spike in regulatory pressures could quickly challenge these optimistic assumptions and significantly alter the long-term outlook for Bank of America.

Find out about the key risks to this Bank of America narrative.

Another View: Discounted Cash Flow Says Undervalued

Taking a different approach, our DCF model paints a more optimistic picture. It suggests that Bank of America’s shares are actually trading below their calculated fair value. Can one model capture the future better than the other?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Bank of America for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Bank of America Narrative

If you would rather dig into the numbers on your own terms or think a fresh perspective could tell a different story, you can easily craft your own narrative in just a few minutes. Do it your way

A great starting point for your Bank of America research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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