There’s a lot of optimism about 2025 — and not just because of the 23% gain in the S&P 500 in this outgoing year. Opinion polls have shown a high level of public confidence in the future Trump The administration will implement pro-business policies, including deregulation and tax cuts, which are expected to further stimulate economic growth.
Savita Subramanian, head of US equity strategy at Bank of America, has been monitoring the situation closely. On the big picture, Subramanian is in line with Bank of America’s S&P 500 target of 6,666 for 2025, which represents an increase of about 13% from current levels. Translating her optimism into actionable advice, Subramanian recommends investors focus on large-cap value stocks.
“Think about the value of large capital. Subramanian argues that it is the large, regulated companies that will get a break with light regulatory management.
Stock analysts at Bank of America follow this logic, highlighting these stocks as their top picks for 2025. We’ll take a closer look at two of these stocks. It’s definitely a big-cap stock, and according to TipRanks’ database, it carries “Strong Buy” ratings from the Street consensus. Let’s dive into the details and find out why Bank of America is these top picks for the new year.
AT&T (T)
At the forefront is AT&T, a true market leader, a long-standing name in the American telecommunications industry, and one of the most recognized brands in the world. As one of the three largest wireless providers in the United States, AT&T boasts a market capitalization of $162 billion, placing it firmly in the large-cap category and ranking it as the fourth largest telecommunications company worldwide. This year, AT&T has also rewarded investors, with the stock price rising nearly 36%.
Strong gains in these telecom stocks were fueled by increases in subscriber numbers. In its most recently reported quarter, 3Q24, AT&T reported a net gain of 226,000 fiber subscribers, marking 19 straight quarters with over 200,000 net fiber additions. This was complemented by strong gains in postpaid phone customers, which totaled 403,000 net additions.
Overall, AT&T had mixed results on both its top and bottom lines in the third quarter. The company reported revenue of $30.2 billion, $250 million below expectations. However, earnings beat expectations, with non-GAAP earnings per share of 60 cents for the third quarter beating expectations by 3 cents per share. Additionally, the company generated $5.1 billion in free cash flow during the quarter.
In addition to bringing in good numbers of subscribers and generating a lot of cash, AT&T is also one of the most reliable dividend payers on the market. The company’s recent dividend dates back to 1984, and the company announced its 1Q25 payment last December 12. This payment, set at $0.2775 per common share, annually amounts to $1.11 and gives a forward yield of 4.91%. The dividend is scheduled to be paid next February 3, and will be twelve quarters in a row at the current rate.
In his coverage of AT&T for Bank of America, analyst Dave Barden points to the company’s subscriber gains and cash flows as attractive data points, writing about the company, “Our top large-cap telecom pick for 2025 is AT&T. Consistent operating performance leads to Improved financial results are beginning to be reflected in improved stock valuation. Steady investment in both wireless and fiber enables AT&T to increase subscriber share in both markets. This will result in higher EBITDA EBITDA and free cash flow that will flow to investors through stock buybacks and consistent dividends, we believe there is room for AT&T to outperform its guidance in the medium term.
Barden continues to place a Buy rating on T shares, and his $28 price target indicates a one-year upside potential for the stock of approximately 23%. (To watch Bardeen’s record, Click here)
The Strong Buy consensus rating on AT&T 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 the average price target, now at $26.65, suggests a 17% gain in the year ahead. (See AT&T Stock Outlook)
Block, Inc (field)
Bank of America’s next pick for 2025 is Block, a leading fintech company founded in 2009 by tech billionaire Jack Dorsey. Block, formerly known as Square, has established itself as a leader in payment processing and continues to successfully operate the Square brand in this space. Furthermore, Block has expanded its portfolio to include the popular digital payment tool Cash App, among others. Another of Block’s most prominent applications Bitcoin Wallet Spiral and online music streaming service Tidal.
Turning to operations, Square and Cash App are Block’s largest subsidiaries and major generators of profits and revenue. Square approaches the online payment landscape from the merchant end, while Cash App serves this segment from the buyer end – together providing Block’s solid product offerings in most aspects of e-commerce transactions.
For merchants, Square makes commerce transactions easier, by 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, both in their location and in how they receive payments. Cash App users can simplify their financial accounts, get global access to their money as well as a wide range of payment options. The app allows users to take advantage of checking and savings accounts, apply for credit services, and even monitor inventory and accounts encryption Investments.
When you factor in the financial results, Block’s last reported quarter, 3Q24, saw total earnings 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 estimates. On the bottom line, non-GAAP EPS came in at 88 cents, in line with expectations. For the 12-month period ending last September 30, the company had adjusted free cash flow of $1.5 billion, up 59% year over year.
This stock has caught the attention of Bank of America analyst Jason Kupferberg, who sees the company at the beginning of a potentially strong performance slope. Kupferberg wrote of Block, “SQ is our top payments pick for ’25. As a U.S.-centric reacceleration story, we think shares can outperform. Critical Square GPV metric should show modest improvement in Q4, more on that in 25 As new initiatives emerge, SQ should also benefit from a stronger US SMB backdrop, plus management has provided initial high-level guidance for 25, reflecting a healthy (and we believe) mix. Adequately estimated) of overall growth and profitability (best among large caps) We also believe SQ can achieve its Base 40 target modestly ahead of schedule.
These comments support Kupferberg’s Buy rating on SQ, while his $115 price target suggests shares will gain 35% in the next 12 months. (To view Kupferberg’s track record, Click here)
Overall, Block has 28 recent analyst reviews and a Strong Buy consensus rating based on a breakdown of 23 Buys, 4 Holds, and 1 Sell. Shares are currently priced at $84.99, with an average price target of $100, suggesting ~18% upside potential over one year. (See SQ stock forecast)
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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.
