We recently compiled a list of the 10 Oversold Bank Stocks To Buy Right Now. In this article, we are going to take a look at where HomeStreet, Inc. (NASDAQ:HMST) stands against the other oversold bank stocks.
Is the Banking Sector Embarking On a Two-Year Growth Cycle?
On January 13, Tom Michaud, KBW CEO, joined CNBC for an interview to discuss his analysis of the banking sector earning season. Michaud is bullish on the sector, he mentioned that the market has had two years of down earnings per share, however, the banking sector is turning the corner on various fronts. Michaud thinks the industry is embarking on a two-year growth cycle and his conviction lies with the biggest banks, which are expected to grow earnings by 15% in 2025. While explaining his conviction, the CEO pointed out the yield curve is no longer inverted, there is positive growth in the loans, and regulations are expected to be positive which will have a material impact on larger as well as smaller banks. Michaud acknowledged the concerns regarding “higher for longer” interest rates, however, he suggested that this calls for more narrowed stock selection for investment.
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Tom Michaud, further elaborated his bullish sentiment by elaborating what kind of banking stocks he likes. One of the top picks by the CEO includes asset-sensitive banks, he thinks as the underlying expectations for the sector are positive, therefore banks with asset sensitivity would perform positively. Michaud also likes the investment banking industry. He thinks that the investment banking cycle is gearing up as investment banking revenue grew more than 25% during 2024. To conclude his top picks, KBW CEO remains inclined towards large banks as they tend to be both asset sensitive and also generate substantial non-interest income.
On the other hand, Michaud is also not bearish on the small and regional banks. As per his analysis, the small and regional banks are also expected to grow but at a slower rate compared to big banks. Michaud estimates these banks will grow earnings at around 6% during 2025, mainly due to weaker non-interest earning capabilities. However, some of the small banks are expected to benefit from the regulation tailwinds. Therefore, Michaud thinks the current concern regarding interest rates can be an opportunity to selectively buy some banking stocks.
Our Methodology
To curate the list of 10 oversold bank stocks to buy right now we used the Finviz Stock Screener and CNN. Using the screener, we compiled an initial list of banking stocks that have lost around 10% to 30% over the past 6 months but analysts expect double the upside. We checked the analyst upside potential from CNN and ranked the stocks in ascending order. Please note that the data was recorded on February 3rd, 2025. Also, note that we checked both Diversified and Regional banks while compiling the list.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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HomeStreet, Inc. (NASDAQ:HMST)
6-Month Performance: -24.91%
Analysts Upside Potential: 14.20%
HomeStreet, Inc. (NASDAQ:HMST) is a financial services company that primarily operates in the Western United States and Hawaii. The company provides commercial banking, mortgage banking, and commercial & retail banking services for both individuals and businesses.
Management has implemented a new strategic plan which revolves around selling $990 million in multifamily loans. HomeStreet, Inc. (NASDAQ:HMST) completed the sale on December 30 to improve its financial stability and liquidity position. As per the fiscal fourth-quarter earnings call of 2024 proceeds were used to pay off more expensive debt, specifically Federal Home Loan Bank advances and broker deposits, which had a higher average interest rate of 4.65%.
Looking ahead, HomeStreet, Inc. (NASDAQ:HMST) anticipates returning to profitability in the first half of 2025 due to the strategic repositioning of its balance sheet and expected reductions in interest rates. The company plans to manage expenses effectively and expects continuous growth in earnings, driven by the repricing of remaining loans and further reductions in borrowings. It is one of the oversold bank stocks to buy right now.
Overall HMST ranks 10th on our list of the oversold bank stocks to buy right now. While we acknowledge the potential of HMST as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HMST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article was originally published at Insider Monkey.