Is First Citizens BancShares, Inc. (FCNCA) One of the Best Revenue Growth Stocks to Buy According to Analysts?
We recently published a list of the 7 Best Revenue Growth Stocks to Buy According to Analysts. In this article, we are going to take a look at where First Citizens BancShares, Inc. (NASDAQ:FCNCA) stands against the other best revenue growth stocks to buy according to analysts.
The Fed recently cut the funds rate by 50 basis points which has been considered a bold move by some analysts while others and most of the market have welcomed it with open arms. Moreover, over 50% of interest rate traders expect another 50 bps cut in the next meeting as well, according to the CME Fed-watch tool.
While the Fed’s move might seem risky, the broader market is up over 2.5% since the cuts, as of September 27.
Jeremy Siegel on the Fed’s Bold Move
In an interview with CNBC Squawk Box on September 19, Professor Jeremy Siegel of the Wharton School expressed his strong approval of the Fed’s decision to cut interest rates by 50 basis points. He called it the best news from the Fed in years.
Professor Siegel believes that this move will lead to a significant rise in the stock market and pointed out that the Fed is now addressing the gap between current rates and what he considers the “new neutral” Fed funds rate of 2.9%.
He said that the Fed has shifted from expecting only one rate cut by the year’s end to anticipating four cuts in total, with the market reflecting expectations of a gradual approach to future cuts.
When asked about concerns from former Fed Vice Chair Roger Ferguson, who warned that the market might be overreacting to the cuts, Siegel said that smaller, consistent rate decreases would be enough.
He suggested that if inflation remains low, the Fed could implement 25 basis point cuts in the upcoming meetings, ultimately reducing rates to around 3.3% to 3.5%. He said with confidence that inflation would not rise significantly, as he referenced the market indicators suggesting it could fall below 2% next year.
In a discussion about economic policies from the presidential candidates, Professor Siegel critiqued both sides as extreme and said that their policies are unlikely to be implemented. He said that there would be a divided government that would limit any drastic changes. He stressed that while some policies might be proposed, actual governance would lead to compromises rather than sweeping reforms.
Historical Insights on Rate Cuts and Stock Returns
According to data from Ned Davis Research, historical trends indicate that stocks tend to perform favorably in the year following the initial interest rate cut. According to the data, the broader market has recorded an average increase of around 12% in the first six months and 15% in the first twelve.
Despite the generally positive outlook for stocks following interest rate cuts, there were exceptions in 2001 and 2007, when the broader market saw declines of 12.4% and 22.2%, respectively, in the year following the Fed’s actions. This shows that historical average performance does not guarantee that rate cuts will always yield favorable outcomes.
However, looking at the last ten rate cut cycles since 1974, the market has risen in eight of those instances, with four cycles resulting in gains of over 20%. Additionally, after the 1974 cut cycle, the market reached a remarkable 40% increase.
Our Methodology
For this article, we used stock screeners to compile a list of over 30 stocks with 5-year revenue compound annual growth rate of 30% or above. Next, we narrowed our list to 7 stocks most favored by analysts. The 7 best revenue growth stocks are listed in ascending order of their average analyst price target upside as of September 27.
We also mentioned the hedge fund sentiment around each stock.
Why are we interested in the stocks that hedge funds pile into? 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).
Is First Citizens BancShares, Inc. (NASDAQ:FCNCA) One of the Best Revenue Growth Stocks to Buy According to Analysts?
First Citizens BancShares, Inc. (NASDAQ:FCNCA)
Average Price Target Upside: 20.56%
5-Year Revenue CAGR: 42.02%
Number of Hedge Fund Holders: 46
First Citizens BancShares, Inc. (NASDAQ:FCNCA) serves as the parent company of First-Citizens Bank & Trust Company, which provides a wide range of banking services to individuals, businesses, and professionals.
Through 500 branches spread across 30 states, the institution offers diverse financial products, including checking and savings accounts, various loan options, and wealth management services.
The extensive footprint and expansive service portfolio position the company as a significant player in the U.S. banking landscape, managing more than $200 billion in assets and ranking among the Fortune 500 companies.
In a significant move in 2023, First Citizens (NASDAQ:FCNCA) expanded its reach by acquiring Silicon Valley Bank, a prominent lender within the tech sector that was seized by the Federal Deposit Insurance Corporation after insolvency.
The transaction involved purchasing around $72 billion in loans at a substantial discount and transferring deposits valued at $56 billion. The acquisition improves its position in the rapidly evolving financial landscape, especially within technology-driven markets.
Recent commentary from JPMorgan’s analyst, Steven Alexopoulos, suggests a turning point for regional banks following a 50 basis point rate cut by the Federal Reserve. The shift signals a potential end to the challenges posed by rising deposit costs and sluggish loan growth.
With the prospect of further rate cuts on the horizon, there is optimism that these factors could transform into supportive conditions for banks. A favorable yield curve, which has begun to normalize, suggests improved net interest margins and improved earnings potential for banks. The firm highlighted First Citizens (NASDAQ:FCNCA), among others, being attractive on current levels.
The stock has a consensus Buy rating from 14 analysts and its average price target of $2,225.00 implies a 20.56% upside from the stock’s present price, as of September 27. It is one of the best revenue growth stocks to buy according to analysts.
According to Insider Monkey’s database, in Q2, 46 hedge funds held stakes in First Citizens (NASDAQ:FCNCA), with positions worth $2.19 billion. As of the second quarter, Harris Associates is the most significant shareholder in the company. The firm has increased its stake in the company by 32% to 676,052 shares worth $1.138 billion.
Artisan Partners stated the following regarding First Citizens BancShares, Inc. (NASDAQ:FCNCA) in its fourth quarter 2023 investor letter:
“First Citizens BancShares, Inc. (NASDAQ:FCNCA) was our top overall contributor in 2023. Headquartered in Raleigh, North Carolina, and one of the largest family-controlled banks in the US, First Citizens was a big winner from its acquisition of the failed Silicon Valley Bank. First Citizens purchased $72.1 billion in loans at a deeply discounted price of $16.5 billion. The transaction adds scale, increases geographic diversity and is financially attractive with downside protections from a loss-sharing agreement with the FDIC. First Citizens is now one of the top-15 largest US banks. The bank is run by and almost fully controlled by CEO Frank Holding and his family members. They have significant ownership, aligning their interest with minority shareholders like us. They’ve done an admirable job of growing the bank by keeping a strong capital and liquidity profile that allows for opportunistic M&A during times of market stress, like we just experienced in March. In the global financial crisis, First Citizens used its position of strength to acquire when others could not, and during the COVID-induced stress of 2020, it flexed its muscles again with the acquisition of CIT at a great price.”
Overall, FCNCA ranks 6th on our list of the best revenue growth stocks to buy according to analysts. While we acknowledge the potential of FCNCA 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 timeframe. If you are looking for an AI stock that is more promising than FCNCA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.