Analysts Split as BMO’s Strong Rally Raises Fresh Questions
Let’s talk about what has been happening around Bank of Montreal lately, because the buzz has been getting louder. On one side, you have analysts who remain optimistic and continue to stand behind the stock. On the other, there are signals suggesting caution might be creeping in. And all of this is happening after a year in which BMO’s share price has already surged more than 27%, making investors wonder whether most of the upside has already been priced in.
CIBC analyst Paul Holden reaffirmed his Buy rating on BMO and kept a price target of C$192. His confidence appears rooted in the bank’s solid earnings performance and its broader long-term strategy. Other firms echoed similar optimism. Canaccord Genuity also issued a Buy rating, and TD Securities even raised its price target slightly. These gestures indicate that several analysts believe the momentum still has room to continue.
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But not everyone is fully convinced. Bank of America Securities maintained a Hold rating, signalling that while the bank is performing well, the stock might be getting closer to fair value. This is reinforced by the fact that BMO’s valuation metrics aren’t unanimously shouting “undervalued.” For instance, its price-to-earnings ratio sits a bit above where fundamentals alone might justify, suggesting that investors are already paying a slight premium for expected growth.
Still, the bank’s financial results paint a compelling picture. It recently posted quarterly revenue of C$19.19 billion and net profit of C$2.33 billion—noticeably stronger than last year’s numbers. Those gains highlight not only stable operations but also the benefits of BMO’s ongoing cross-border expansion and its focus on building long-term earnings power. Even so, insider sentiment has turned negative, with more insiders selling shares in recent months, which sometimes hints at internal concern about future valuation.
Meanwhile, deeper valuation models present mixed conclusions. The Excess Returns approach suggests BMO could actually be significantly undervalued—by nearly 30%—based on how efficiently the bank reinvests capital and earns above its cost of equity. But simpler comparisons, such as the PE ratio, suggest it may be trading slightly above where fundamentals imply it should be.
This divide in perspective is exactly why the market seems conflicted. Some investors see long-term opportunity driven by strong fundamentals and continued expansion. Others worry that slower economic growth, rising credit costs, or integration risks could limit upside from here.
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