Western Alliance’s (NYSE:WAL) first-quarter 2023 results exceeded analysts’ expectations despite a challenging market scenario. It is noteworthy that WAL stock increased roughly 17% yesterday in extended trading after the company disclosed that deposit balances, which were impacted by the failure of two U.S. banks in early March, stabilized by the end of Q1. Additionally, there was a $2 billion increase in deposits from March 31 to April 14.
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Adjusted earnings per share (EPS) of $2.30 easily surpassed the Street’s expectations of $1.97 and increased 3.6% year-over-year. Meanwhile, the company’s Q1 adjusted revenues increased by about 28% to $712.2 million. Also, the top line came in higher than the consensus estimate of $669.86 million.
In terms of other important metrics, WAL increased its provision for credit losses to $19.4 million from $9 million in the first quarter of 2022. The rise can be attributed to increased economic uncertainty and a charge-off related to debt security at a financial institution.
Further, the net interest margin, a key measure for the bank’s profitability, expanded by 47 basis points to 3.79% from the year-ago quarter.
What’s the Prediction for WAL Stock?
WAL stock has a Moderate Buy consensus rating based on nine Buy and four Hold recommendations. Also, the analysts’ average price target of $58.80 implies a solid upside potential of 80.9%. Shares have declined 44.2% so far in 2023.
The stock seems to be undervalued. Its current price-to-earnings ratio of 3.4x reflects a 64.6% discount from its five-year average of 9.6x.
