Many investors are concerned about the current banking sector crisis, and that’s understandable. Yet, Western Alliance (NYSE:WAL) is in a better capital position than the company’s critics might think. A prominent analyst group recently assigned an eye-opening bullish price target to WAL stock. Thus, you may want to consider a position in Western Alliance after conducting your due diligence.
The implosion of some regional banks has been an ongoing story in the first half of 2023. SVB Financial Group (OTCMKTS:SIVBQ) subsidiary Silicon Valley Bank and Signature Bank (OTCMKTS:SBNY) have been among this sector’s most notorious failure cases.
Does Western Alliance belong in this shameful category, though? Not necessarily. Granted, not every analyst group likes Western Alliance right now, but the company appears to be financially firm and fully-capable of surviving America’s banking segment troubles.
What’s Happening With WAL Stock?
If you can believe it, WAL stock has recently declined from a 52-week high of $86.87 to the $35 area. This has left Western Alliance with an enticing trailing 12-month price-to-earnings ratio of just 3.7-times.
Income-focused investors should also be glad to hear that Western Alliance pays a forward annual dividend yield of around 4%. Be aware, however, that the company’s price-earnings ratio and dividend yield could change shortly.
Whenever a stock loses a lot of value quickly, it seems like an analyst group is right around the corner, ready to issue a downgrade. In this case, analysts with Fitch Ratings placed Western Alliance on review for a potential downgrade from the current BBB-plus debt rating.
The Fitch analysts feel that “current market conditions have created liquidity stresses outside the baseline assumptions” for Western Alliance. Should investors worry about the company’s ability to withstand “liquidity stresses,” though?
Western Alliance Bancorp Affirms Its Financial Strength
A press release from Western Alliance seems to contradict Fitch’s bearish analysis. The company assures it “remains in a strong position, with immediately available liquidity of over $20 billion as of 16 March 2023.”
Furthermore, the company reported that “net outflows have fallen sharply” after the “elevated net deposit outflows” of 13 March. Additionally, deposit balance fluctuations had returned to “normalized levels in recent days, including significant inflows and new account openings.”
Western Alliance also provided data on the company’s solid capital and diversified deposit bases. Even beyond the data, it’s encouraging to learn that Citadel founder Ken Griffin disclosed a mega-sized position in WAL Stock.
Meanwhile, UBS (NYSE:UBS) analysts named Western Alliance their number-one pick out of 19 mid-cap banks. Plus, the analysts assigned an ambitious $85 price target on WAL stock. UBS analyst Brody Preston believes that the bank’s “exposure to more volatile tech/ innovation deposits” is “manageable” and that Western Alliance’s “credit profile is fundamentally misunderstood.”
What You Can Do Now
Western Alliance might be susceptible to future downgrades from Fitch analysts. However, this isn’t a valid reason to miss a great investment opportunity.
Regarding deposit outflows, the worst is probably in the rear-view mirror for Western Alliance. Thus, now may be the time to consider adding a few WAL stock shares. After all, a relief rally could send the share price up to UBS’s $85 target this year.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.