The regional bank rout has created a buying opportunity that could be a windfall for investors, according to investment firm Janney Montgomery Scott. Phoenix-based Western Alliance shares plunged nearly 27% last week, with a massive 38% drop on Thursday alone, as the market reeled from the closure and sale of First Republic. Janney analyst Timothy Coffey said in a note to clients on Monday that Western Alliance is now “dirt cheap” and reiterated his buy rating on the stock. “Bank stocks of all stripes have been volatile since Silicon Valley Bank and Signature Bank were closed in mid-March. However, recent volatility in WAL (and, for that matter, PACW, BUY-rated) do not indicate company-specific weakness,” the Janney note said. WAL 1M mountain Western Alliance’s stock fell sharply in the first week of May. Thursday’s dramatic action seemed to be driven by short-selling activity and fear, Coffey said. As evidence of strength, he pointed to the bank’s May 3 update that predicted deposit growth in the second quarter and the fact that Western Alliance has not cut its dividend. “All of that indicates a healthy financial situation and not one headed for insolvency,” the note said. Janney has a fair value estimate of $63 per share for Western Alliance, which is more than 100% above where the stock closed on Friday. The stock was trading above $70 per share in March before Silicon Valley Bank collapsed, triggering the selloff for regional banks. “We believe this is a superior company with a broken stock. Profit-maximizing investors should buy that combination every time it happens. And, it is happening right now with WAL,” the note said. — CNBC’s Michael Bloom contributed to this report.
