Tumbling to a price of $86.68 during today's afternoon trading session, shares of Western Alliance Bancorporation are now -9.34% below their average target price of $95.61. Does this mean the stock will reverse course? Analysts are giving WAL an average rating of buy and target prices ranging from 48.35 to 110.0 dollars per share.
We can use Western Alliance Bancorporation's short interest as a proxy for determining general market sentiment regarding the stock. The short interest is the percentage of the share float that represents short positions, meaning that the investor believes the stock will decline in the future. Since WAL's short interest is 7.0%, the market sentiment is mixed on this stock.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Western Alliance Bancorporation, institutional investors own 83.3% of the shares, which indicates they have a very high stake in the company. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in WAL, it probably means they believe it is a solid investment choice.
But it could also mean they are buying up shares in an effort to acquire the company or to get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
To sum up, Western Alliance Bancorporation is probably the subject of mixed market sentiment because of an analyst consensus of some upside potential, a buy rating, an average amount of shares sold short, and a significant number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about WAL:
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The stock has trailing 12 month earnings per share (EPS) of $6.47
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Western Alliance Bancorporation has a trailing 12 month Price to Earnings (P/E) ratio of 13.4 compared to the S&P 500 average of 29.3
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The company has a Price to Book (P/B) ratio of 1.49 in contrast to the S&P 500's average ratio of 4.74
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Western Alliance Bancorporation is a Finance company, and the sector average P/E and P/B ratios are 20.04 and 1.86 respectively
