Davidson upgrades PacWest shares to buy as bank stock continues to crater another 37%

Published Mon, Mar 13 20239:01 AM EDT

PacWest Bancorp shares continued to crater on Monday amid fears of contagion from the Silicon Valley Bank failure , prompting Davidson to say the sell-off represents a more attractive entry point for buyers. Citing the 54% decline in PacWest's stock on Thursday and Friday, Davidson upgraded shares to buy from neutral, while lowering its price target to $29 from $31. The stock continued to fall on Monday, shedding another 37% in premarket trading. "Given PACW's financial update largely in-line with our 1Q expectations, continued execution of the balance sheet contraction strategy, valuation of 73% of TBV, and a positive bias reflected in our recent update, we think last week's sell-off represents a more attractive entry point for investors, particularly on the heels of Sunday's announced Bank Term Funding Program (BTFP) by the Fed," analyst Gary Tenner wrote in a client note on Monday. Tenner noted that the downward shift in his price target was in "recognition that current market sentiment and the need to prove out the strategic shift, could remain a limiting factor on valuation over the intermediate term." PACW 5D mountain PacWest shares have plunged after the SVB failure The Silicon Valley Bank failure has sent shockwaves through technology companies and venture capital firms, many of which had deposited their funds in the now-defunct bank. Davidson believes that SVB's failure could potentially create opportunities for other venture capital-focused banks going forward. Tenner noted that PacWest's venture capital related deposits, currently 33% of its total deposits, have declined 27% from the end of 2021. "We have anticipated the SVB failure will result in other banks active in the VC space experiencing an increase in customer and deposit acquisition activity, and believe the Treasury, Federal Reserve, and FDIC's joint decision to backstop uninsured deposits of Silicon Valley and Signature could increase the speed and magnitude of funds transfers to other institutions," said Tenner. "While we think most bank management teams will be conservative in how they utilize new deposits, to the degree inflows help stabilize PACW's total deposit balances, we would view that positively," the analyst added. PacWest stock has fallen about 72% during the past 12 months. —CNBC's Michael Bloom contributed to this report.