Piper Sandler Downgrades KeyCorp On Valuation After Big 2020 Run

Shares of regional bank KeyCorp KEY are up around 140% from its March 2020 and the strong gains no longer justify a continued bullish stance on the stock, according to Piper Sandler.

The KeyCorp Analyst: R. Scott Siefers downgraded KeyCorp's stock from Overweight to Neutral with an unchanged $20.50 price target.

The KeyCorp Thesis: Regional banks remain a "solid" space for investors as it offers relative value versus the broader market, Siefers wrote in the note. But in KeyCorp's case, the stock is up more than 25% since the start of 2021 and trading at a hefty valuation.

KeyCorp's stock is trading at 12.1 times 2022 estimated EPS and implies it no longer trades at a "meaningful" discount to its peers, the analyst wrote. In fact, the discounted valuation was one of the pillars to justify buying the stock in the past.

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KeyCorp's stock is also trading at 152% of its tangible book value (TBV), which is "right on top" of other large regional peers.

Despite a downgrade, KeyCorp remains well-positioned to take advantage of a favorable market and its portfolio of products allows it to differentiate itself from rivals.

The bottom line, the stock no longer offers the same degree of upside potential to support a bullish rating.

KEY Price Action: Shares of KeyCorp were trading higher by 2.8% Wednesday at $21.23.