After a series of bank failures and stock price falls, analysts who specialize in financial stocks may have to go back to their textbooks and sort out their views on the future.
Because right now, it seems like nearly every Wall Street analyst covering the space is keeping quiet about what could have been an easy decision, turning more cautious on dozens of individual stocks.
Just look at the latest data from FactSet to get a feel for the weird vibe.
As of March 16, 92% of the S&P 500 financials sector were rated buy or hold, with the rest rated sell. Frankly, even with the collapse and crash of Silicon Valley Bank (SIVB-US), First Republic (FRC-US) and Signature Bank (SBNY-US), and the mounting pressure on Credit Suisse (CS-US), analysts Still very engaged; very “constructive,” in Wall Street terms.
To put it another way: 48% of stocks are rated as Buys, 44% are rated as Holds, and 8% are rated as Sells. Even with the ongoing banking crisis, the proportion of buy-rated financial stocks has fallen by only 4 percentage points since February 28.
For perspective, the KBW Bank ETF (BKX-US) has lost 25% over the last month, while the S&P 500 has lost 5%.
Analysts are almost as bullish on financials as they are on industrials not in crisis mode. 49% of the industrials sector in the S&P 500 are rated buy.
Going a step further, analysts’ forecast for financials is for a strong 9.4% year-over-year first-quarter revenue increase, which would cover the impact of including the current crisis at the end of the March 31 quarter. If the hit is really factored into the estimates, FactSet notes that financials will have the fastest revenue growth of any sector in the S&P 500.
Bottom Line: If analysts don’t step up and change their minds on financial stocks, customers will be in the dark.