There is a lot of enthusiasm about 2025 – and not just because of the 23% rise in the S&P 500 this year. Voting has shown a high level of public confidence that the entrants 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 macro picture, Subramanian is in line with BofA's S&P 500 target of 6,666 for 2025, which represents an increase of about 13% from current levels. Translating his optimism into practical advice, Subramanian recommends that investors focus on large-cap value stocks.
“Think what's in large cap value. Big regulated companies are going to get a break under a light regulatory administration,” Subramanian said.
The stock analysts at Bank of America follow this reasoning, highlighting such stocks as their top pick for 2025. We'll take a closer look at two of these stocks. They are undoubtedly large-cap equities, and, according to the TipRanks database, they carry 'Strong Buy' ratings from the Street consensus. Let's dig into the details and find out why BofA considers them top picks for the new year.
AT&T (T)
Up first is AT&T, a premier market stalwart, a legacy name in the US telecommunications industry, and one of the world's most iconic brands. As one of the three largest wireless providers in the United States, AT&T has a market cap of $162 billion, placing it firmly in the large cap category and placing it as the fourth largest telecommunications 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 an increase in the number of subscribers. In its last reported quarter, 3Q24, AT&T reported a net gain of 226,000 fiber subscribers, marking 19 consecutive quarters with 200,000-plus net fiber additions. This was supported by strong gains in postpaid phone customers, totaling 403,000 net additions.
Overall, AT&T had mixed results on the top and bottom lines in Q3. The company reported revenue of $30.2 billion, short of forecasts of $250 million. Earnings, however, outperformed expectations, with AT&T's non-GAAP EPS of 60 cents for Q3 beating projections by 3 cents per share. In addition, the company generated $5.1 billion in free cash flow during the quarter.
In addition to bringing in solid 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 company declared its 1Q25 payout this past December 12. That payout, set at $0.2775 per common share, is annualized to $1.11 and giving a forward yield of 4.91%. The dividend is expected to be paid on February 3, and will mark twelve consecutive quarters at the current rate.
In his coverage of AT&T for Bank of America, analyst Dave Barden notes the company's subscriber earnings and cash flow as attractive data points, and writes of the company, “Our top large-cap telecom pick for 2025 is AT&T . Consistent operational performance ensures better financial results which begin to be reflected in better stock valuation. Steady investment in wireless and fiber positions 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 constant dividend. We believe there is room for AT&T to outperform its medium-term guidance.”
Barden continues to give T shares a Buy rating, and his price target of $28 suggests a one-year upside potential for the stock of ~23%. (To watch Barden's story, click here)
The consensus Strong Buy rating on AT&T stock is based on 18 recent analyst reviews that include 15 for Buy and 3 for Hold. T is currently trading at $22.77 and its average price target, now $26.65, points to a 17% upside in the coming year. (See AT&T stock forecast)
Block, Inc. (SQ)
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. Furthermore, Block has expanded its portfolio to include the popular digital payment tool Cash App, among others. Prominent among other Block apps is the bitcoin the Spiral wallet and the online music streaming service Tidal.
Turning to operations, Square and Cash App are Block's largest subsidiaries and its main generators of earnings and revenue. Square approaches the online payment landscape from the merchant end, while Cash App serves the segment from the buyer's end – together giving Block solid product offerings in most aspects of e-transactions. -trade.
For merchants, Square streamlines 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, both in their location and in how they can take payments. Cash App users can simplify their financial accounts, having universal access to their money along with a wide range of payment options. The app lets users access checking and savings accounts, apply for credit services, and even monitor stock and crypt investments.
When it comes to financial results, Block's last reported quarter, 3Q24, saw gross profit of $932 million from Square and $1.31 billion from Cash App, for year-over-year gains of 16% and 21% respectively. Net revenue in the quarter totaled $5.98 billion, up 6.4% year over year – although $280 million below estimates. On the bottom line, Block's non-GAAP EPS came in at 88 cents, in line with expectations. For the 12-month period ended last September 30, the company had adjusted free cash flow of $1.5 billion, up 59% year over year.
This stock caught the attention 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-focused re-acceleration story, we think equities can outperform. The critical GPV Square metric should show modest improvement in 4Q, and more so in '25 as new initiatives take hold. SQ should also benefit from a more solid US SMB background, and mgmt has provided initial '25 high-level guidance, which reflects a healthy (and we believe underappreciated) combination of topline growth and profitability (the best among large caps). We also think SQ could achieve its Rule target of 40 a little earlier than expected.”
These comments support Kupferberg's Buy rating on SQ, while his $115 price target suggests the shares will gain 35% in the next 12 months. (To watch Kupferberg's story, click here)
Overall, Block has gathered 28 recent analyst reviews, earning a consensus rating of Strong Buy 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 ~18% upside potential over the one-year horizon. (See SQ stock forecast)
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Disclaimer: The views expressed in this article are solely those of the analysts involved. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
