Bank of America Stock: Buy, Sell, or Hold?

Shares of Bank of America (NYSE: BAC) are down approximately 14% from their 52-week high amid the broader stock market sell-off. Concern over the U.S. economy and the impact of trade tariffs being implemented by the Trump administration have marked a decisive shift in investor sentiment.

Nevertheless, you might not want to withdraw your interest in this banking titan just yet. The company remains highly profitable and is well positioned to create shareholder value over the long run.

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Is now the time to buy the dip, or cash out? Let's discuss what to do with Bank of America stock now.

The case to buy and hold Bank of America

Mixed economic signals from key indicators have compelled investors to reassess some of their loftiest expectations from the start of the year. The headlines surrounding trade policy, with mixed messaging about the extent and duration of tariffs, haven't helped. Historically, markets dislike this type of unpredictability, which helps explain why the S&P 500 index has declined about 8% from its recent peak.

Still, it's crucial to keep the bigger picture in mind. Beyond some lower stock prices, little has changed in the real economy, and it's business as usual for most companies.

There are also some positive developments. The latest Consumer Price Index (CPI) data for February showed a lower-than-expected annual rate of inflation: 2.8%, down from January's 3% pace. This is encouraging because cooling inflation could provide the Federal Reserve with the flexibility to cut interest rates, which in turn could support economic activity and boost demand for loans.

Because Bank of America is one of the largest financial institutions in the United States, its stock price is closely tied to how these conditions unfold.

Image source: Getty Images.

The bank had a record year in 2024, surpassing $100 billion in net revenue for the first time, highlighted by strong fee income across all business segments and a 4% increase in earnings per share (EPS) from 2023. Key themes from last year include the bank's digital innovation, where the increasing adoption of mobile banking and the integration of artificial intelligence (AI) capabilities have helped improve efficiency, reduce costs, and enhance client engagement.

During the fourth-quarter earnings report (for the period ended Dec. 31), CEO Brian Moynihan expressed confidence in the outlook, suggesting the bank's foundation was stronger than ever:

We finished 2024 with a strong fourth quarter. Every source of revenue increased, and we achieved better-than-industry growth in deposits and loans. We believe this broad momentum positions Bank of America very well for 2025.

Investors convinced that the U.S. economy will push through this latest iteration of the proverbial "wall of worry" have ample reasons to buy and hold Bank of America stock.

The case to sell Bank of America

Despite room for optimism that the recent stock market weakness may be temporary, the possibility that economic conditions could deteriorate cannot be dismissed. A scenario in which consumer spending weakens, leading to rising unemployment and diminished corporate earnings, would directly impact Bank of America. We're not there yet, but it's a risk investors need to weigh.

Another challenge warranting caution is that the stock doesn't necessarily scream that it's a bargain, even after the pullback. Valuation metrics -- including a price-to-earnings ratio (P/E) of 12.5 and a price-to-book value (P/B) of 1.1 -- are both near their five-year running averages, suggesting the stock is neither significantly overvalued nor undervalued, but could still fall further.

Investors who believe 2025 will prove challenging for the bank might consider selling the stock or at least avoiding it for now.

BAC PE Ratio data by YCharts.

Decision time: A wait-and-see approach

Recognizing the near-term uncertainties, Bank of America stock offers a 2.6% dividend yield and enough tailwinds in its outlook to justify continuing to hold it. That said, for investors still on the sidelines, there's likely no need to rush out and load up on shares, as a bit of patience could provide a more attractive buying opportunity at a lower price if volatility persists.

Either way, Bank of America remains a bellwether for the economy that all investors should keep on their radar.

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Bank of America is an advertising partner of Motley Fool Money. Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.