There’s a lot of bullishness about 2025 – and not just because of the 23% gain in the S&P 500 in this outgoing year. Polling has shown a high level of public confidence that the incoming Trump administration will implement pro-business policies, including deregulation and tax cuts, which are anticipated to further stimulate economic growth.
Savita Subramanian, head of US equity strategy at Bank of America, has been closely monitoring the situation. On the macro picture, Subramanian aligns with BofA’s S&P 500 target of 6,666 for 2025, which represents about a 13% increase from current levels. Translating her optimism into actionable advice, Subramanian recommends that investors focus on large-cap value stocks.
“Think about what’s in large-cap value. It’s big regulated companies that are going to get a break under a regulatory light administration,” Subramanian opined.
The stock analysts at Bank of America are following this reasoning, highlighting such stocks as their top picks for 2025. We’ll take a closer look at two of these stocks. They’re undeniably large-cap equities, and, according to the TipRanks database, they carry ‘Strong Buy’ ratings from the Street’s consensus. Let’s delve into the details and uncover why BofA considers them top picks for the new year.
AT&T (T)
Up first is AT&T, a true blue-chip stalwart in the market, a legacy name in the US telecom industry, and one of the world’s most iconic brands. As one of the three largest wireless providers in the US, AT&T boasts a market cap of $162 billion, placing it firmly in the large-cap category and ranking it as the fourth-largest telecom company worldwide. This year, AT&T has also rewarded investors, with the stock rising nearly 36%.
The strong gains in this telecom stock have been bolstered by increases in subscriber numbers. In its last reported quarter, 3Q24, AT&T reported a net gain of 226,000 fiber subscribers, marking 19 quarters in a row with 200,000-plus net fiber adds. This was complemented by strong gains in postpaid phone customers, which totaled 403,000 net adds.
Overall, AT&T delivered mixed results on both the top and bottom lines in Q3. The company reported revenue of $30.2 billion, falling short of forecasts by $250 million. Earnings, however, outperformed expectations, with AT&T’s non-GAAP EPS of 60 cents for Q3 exceeding projections by 3 cents per share. Additionally, the company generated $5.1 billion in free cash flow during the quarter.
In addition to bringing in sound subscriber numbers and generating plenty of cash, AT&T is also one of the market’s most reliable dividend payers. The company’s modern dividend history stretches back to 1984, and the firm declared its 1Q25 payment this past December 12. That payment, set at $0.2775 per common share, annualizes to $1.11 and gives a forward yield of 4.91%. The dividend is scheduled for payment this coming February 3, and will mark twelve quarters in a row at the current rate.
In his coverage of AT&T for Bank of America, analyst Dave Barden notes the company’s subscriber gains and cash flows as attractive data points, and writes of the firm, “Our top large cap telecom pick for 2025 is AT&T. Consistent operational performance is delivering improved financial results that are beginning to be reflected in an improved stock valuation. Steady investment in both wireless and fiber are positioning AT&T to grow subscriber share in both markets. This will drive higher adj. EBITDA and free cash flow that will flow to investors through share buybacks and a steady dividend. We believe there is room for AT&T to outperform its medium-term guidance.”
Barden goes on to put a Buy rating on T shares, and his price target of $28 suggests a one-year upside potential for the stock of ~23%. (To watch Barden’s track record, click here)
The Strong Buy consensus rating on AT&T’s stock is based on 18 recent analyst reviews that include 15 to Buy and 3 to Hold. T is currently selling for $22.77 and its average price target, now at $26.65, points toward a gain of 17% in the year ahead. (See AT&T stock forecast)
Bank of America’s next pick for 2025 is Block, a leading fintech company founded in 2009 by tech billionaire Jack Dorsey. Formerly known as Square, Block has established itself as a leader in payment processing and continues to successfully operate the Square brand in that niche. Moreover, Block has expanded its portfolio to include the popular Cash App digital payment tool, among others. Prominent among Block’s other apps are the bitcoin wallet Spiral and the online music streaming service Tidal.
Turning to operations, Square and Cash App are Block’s largest subsidiaries and its main generators for earnings and revenues. Square approaches the online payment landscape from the merchant end, while Cash App services the segment from the buyer’s end – together giving Block solid product offerings in most aspects of e-commerce transactions.
For merchants, Square smooths out the processes of transacting business, providing software that can be accessed from smartphones and tablets, and hardware that can turn these mobile devices into mobile card readers and cash registers. Merchants benefit from flexibility, in both their location and in how they can take payments. Cash App users can streamline their financial accounts, gaining universal access to their money plus a wide range of payment options. The app lets users tap into checking and savings accounts, apply for credit services, and even monitor stock and crypto investments.
Getting into financial results, Block’s last reported quarter, 3Q24, saw gross profits of $932 million from Square and $1.31 billion from Cash App, for year-over-year gains of 16% and 21% respectively. Total net revenue in the quarter was $5.98 billion, up 6.4% year-over-year – although $280 million below the estimates. At the bottom line, Block’s non-GAAP EPS came in at 88 cents, in-line with expectations. For the 12-month period ending this past September 30, the company had an adjusted free cash flow of $1.5 billion, up 59% year-over-year.
This stock caught the eye of Bank of America analyst Jason Kupferberg, who sees the company at the start of a potentially strong performance ramp. Kupferberg writes of Block, “SQ is our top Payments pick for ’25. As a US-centric re-acceleration story, we believe shares can outperform. The critical Square GPV metric should show modest improvement in 4Q, and more so in ’25 as new initiatives take hold. SQ should also benefit from a more robust US SMB backdrop, plus mgmt has provided initial high-level ’25 guidance, reflecting a healthy (and we think under-appreciated) combination of topline growth and profitability (best among large-caps). We also think SQ could achieve its Rule of 40 target modestly ahead of schedule.”
These comments support Kupferberg’s Buy rating on SQ, while his $115 price target implies that the shares will gain 35% in the next 12 months. (To watch Kupferberg’s track record, click here)
All in all, Block has garnered 28 recent analyst reviews, earning a Strong Buy consensus rating based on a breakdown of 23 Buys, 4 Holds, and 1 Sell. The shares are currently priced at $84.99, with an average price target of $100, suggesting an upside potential of ~18% over the one-year horizon. (See SQ stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
