Western Alliance Bancorp. is IBD Stock Of The Day. The bank holding company is taking a pause just below a buy point. WAL stock fell Tuesday amid a general market downturn following near-term high bond yields.
Western Alliance is the holding company for regional banks in Nevada, Arizona and California including the Bank of Nevada and Torrey Pines Bank. The company is headquartered in Phoenix.
Regional banking stocks have done well in recent weeks amid rising Treasury yields. While rising rates can be a headwind for many stocks, bank stocks often benefit from higher Treasury yields, especially as the spread widens between short-term and long-term rates.
Western Alliance is also taking advantage of digital currency trends. In December, Western Alliance Bank announced it would partner with Tassat Group to offer real-time digital payments through the TassatPay Network. The network includes a private Ethereum blockchain.
WAL Stock
Shares fell 2.8% to 118.94 on the stock market today. WAL stock is taking a breather just under a buy point after forming a cup base with a 124.98 entry point, according to MarketSmith analysis.
The stock's relative strength line is near highs. The relative strength line compares a stock's performance to that of the S&P 500. When the RS line is climbing, this means it is outperforming the benchmark index.
WAL stock is the top-ranked stock in IBD's Banks-West/Southwest industry group.
It has a perfect Composite Rating of 99 and a 98 EPS Rating. The Composite Rating compiles scores on key fundamental and technical metrics: earnings and sales growth, profit margins, return on equity, and relative price performance. Investors should focus on stocks with a Composite Rating of 90 or higher.
Western Alliance Earnings Due
So far this earnings season most big banks, including JPMorgan Chase, Citigroup and Wells Fargo have reported better-than-expected fourth-quarter results. But JPMorgan and Citigroup tumbled last week following results, while Goldman Sachs plunged Tuesday on weak earnings.
The 10-year Treasury yield jumped to a two-year high on Tuesday. But the two-year yield also soared, meaning the spread between short- and long-term rates isn't widening.
Western Alliance is set to report fourth-quarter results on Jan. 28. Analysts polled by FactSet see the Western Alliance earnings rising 19% to $2.30 per share with a 64% jump in revenue to $561.1 million.
Revenue growth has accelerated for the past four quarters, from -3% to 79%.
However, investors need to be cautious about buying the banking stock ahead of earnings. Quarterly reports perceived as even slightly negative could send the stock tumbling. This is a good time to use an earnings options buying strategy, in order to limit risk.
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