Is $13 the New Ceiling for Bank of America?

Bank of America (NYSE: BAC  ) had a pretty decent week, relatively speaking. It was boosted earlier in the week when news of a settlement with MBIA reached the markets, and even some threatened legal action by the state of New York didn't affect it all that much. Even Friday morning, with Citigroup and JPMorgan Chase relatively flat, Bank of America remains slightly higher.

Meeting resistance
It was a little less than two weeks ago that my colleague John Grgurich wondered if Bank of America would remain closer to $10 than not. Obviously, it seems to have pushed past this threshold, but it seems to be meeting resistance around $13 a share. Granted, it is only in the past couple of days that the stock has traded above this level, but there has been numerous times over the past few months where it has approached, but not exceeded, this price:

BAC Chart

BAC data by YCharts.

What does it mean?
In general, we at the Fool believe that daily stock price movements are unimportant unless there is some news surrounding the move. With a stock that gets as much coverage as Bank of America, however, sometimes it's important to see if there are any reasons why it's not moving and where it could ultimately end up.

As anyone that follows Bank of America knows, it is currently trading at a steep discount to book value, and a slight discount to tangible book value. Among the Big Four banks, Bank of America "wins" the price/book value battle, while Citigroup barely beats B of A in the price/tangible book value fight:

Company

Book Value per Share

Tangible Book Value per Share

Price/Book Value

Price/Tangible Book Value

Bank of America 

$20.30

$13.46

0.64

0.97

Wells Fargo 

$28.27

$23.30 

1.36

1.65

JPMorgan Chase 

$52.02

$39.54

0.96

1.26

Citigroup 

$62.51

$52.35

0.78

0.94

Source: 2013 First Quarter filings; prices as of May 8, 2013.

Based on its book value alone, there seems to be plenty of room for Bank of America to grow. However, the consensus analyst estimate is currently $12.87, meaning it is trading just north of what the "experts" seem to think. Personally, I think the true value of the bank lies somewhere between its book value and tangible book value, so it's only a matter of time before it manages to leave $13 solidly in its rearview mirror as it heads toward these heights.

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Comments from our Foolish Readers

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  • Report this Comment On May 11, 2013, at 7:26 AM, Rusty56 wrote:

    yawn

  • Report this Comment On May 11, 2013, at 7:44 AM, kickbishopbrenna wrote:

    Looks like an option play to me..some of us might even have done so on BAC and C.. low capital risk, huge potential in long run, near lows, look like synthetic longs or BCS's to me!

  • Report this Comment On May 11, 2013, at 9:59 AM, mrwittyone wrote:

    I'm no chart expert, but looking at the three month chart of BAC, it looks to be in an up trend.

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