What Happened?
Shares of regional bank holding company CVB Financial (NASDAQ: CVBF) fell 4.5% in the morning session after it agreed to acquire Heritage Commerce Corp. in an all-stock deal valued at approximately $811 million.
The deal was intended to expand CVB's presence in the Bay Area. While the transaction was expected to add to earnings per share in the future, it was also projected to be 7.7% dilutive to the company's tangible book value per share. This type of dilution can concern existing shareholders as it can reduce the value of their holdings in the near term.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy CVB Financial? Access our full analysis report here.
What Is The Market Telling Us
CVB Financial’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 27 days ago when the stock gained 3.7% on the news that comments from a key Federal Reserve official boosted hopes for an interest rate cut. New York Federal Reserve President John Williams stated he sees “room for a further adjustment” in the near term, sparking a significant market rally. Following his remarks, the probability of the central bank cutting rates at its December meeting jumped from 39% to over 73%, according to the CME FedWatch tool. This positive sentiment provided relief to markets amid concerns over high valuations, particularly in AI-related stocks.
CVB Financial is down 7.3% since the beginning of the year, and at $19.32 per share, it is trading 13% below its 52-week high of $22.20 from December 2024. Investors who bought $1,000 worth of CVB Financial’s shares 5 years ago would now be looking at an investment worth $984.36.
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