Zions Bancorporation's Valuation Outlook: Contrarian Opportunity or Lingering Risk?

Jefferies' recent upgrade of Zions Bancorporation (NASDAQ: ZION) from “underperform” to “hold,” coupled with a raised price target from $45 to $60, has sparked renewed interest in the regional bank. This move, driven by Zions' robust second-quarter earnings and improved growth projections, raises critical questions about whether the adjustment reflects a genuine risk mitigation or a contrarian buying opportunity. To assess this, we must dissect the firm's financial performance, sector-wide trends, and valuation metrics.

Jefferies' Upgrade: A Reassessment of Zions' Trajectory

Jefferies' analysts highlighted Zions' Q2 2025 results as a catalyst for the upgrade. The bank reported earnings per share (EPS) of $1.63 and revenue of $838 million, both exceeding expectationsZions Bancorporation, N.A. (NASDAQ:ZION) Stock Rating Upgraded by Jefferies Financial Group^[2]. Notably, Zions' net interest margin (NIM) expanded to 3.17%, a figure that has grown for six consecutive quartersZions Bancorp (ZION) Receives Upgrade from Jefferies Analyst^[3]. Jefferies also adjusted its target multiple for Zions from 8.3x to 10.4x, aligning it closer with peer averages, and projected 17% EPS growth in 2025 and 2% in 2026Zions Bancorporation, N.A. (NASDAQ:ZION) Stock Rating Upgraded by Jefferies Financial Group^[2]. These revisions suggest a recalibration of expectations, emphasizing Zions' alignment with industry peers in loan growth, fee income, and capital efficiency.

However, the upgrade must be contextualized within Zions' recent history. In May 2025, Jefferies had initiated coverage with an “underperform” rating and a $40 price target, citing slower earnings growth and weaker capital metrics compared to rivalsZions Bancorp (ZION) Receives Upgrade from Jefferies Analyst^[3]. The shift to “hold” indicates a narrowing of performance gaps, but it also underscores lingering concerns about the bank's ability to sustain momentum.

Historical data reveals a mixed pattern for Zions following earnings beats. From 2022 to 2025, 11 instances of Zions beating earnings expectations were analyzed. On average, the stock underperformed in the days and weeks following these events, with a -0.9% return after 3 days, -1.2% after 5 days, and -1.8% after 30 days. The hit rate—defined as the percentage of beats followed by positive performance—hovered between 27% and 55% across these timeframes, indicating limited consistency in directional outcomes. Furthermore, Zions underperformed relative to the S&P 500 benchmark on most horizons, suggesting that past earnings surprises did not reliably translate into outperformance. These findings highlight the importance of cautious optimism, even in the face of strong quarterly results.

Sector Trends: A Mixed Landscape for Regional Banks

The broader regional banking sector is navigating a complex environment. On the positive side, net interest margins (NIMs) are expanding as the yield curve re-steepens, a trend that could boost profitability for banks like Zions. According to the Federal Reserve, U.S. banks' NIMs rose in Q3 2025, driven by higher asset yields outpacing deposit costsBanking Analytics: Net Interest Margins Rise at U.S. Banks^[4]. For regional banks, which rely heavily on traditional lending, this dynamic is particularly favorable.

Regulatory tailwinds also present opportunities. Eased capital requirements and a pro-business agenda have spurred merger activity, enabling cost synergies and competitive differentiation2025 Bank Stress Tests Reveal Resilience and Opportunity for Regional Banks^[5]. Jefferies' 440-page report on U.S. regional banks underscores these factors, noting that forward P/E ratios for the sector are significantly lower than the S&P 500, creating a valuation gap that could attract investorsJefferies upgrades Zions Bancorp stock rating to Hold on improved growth outlook^[1].

Yet risks persist. Commercial real estate (CRE) exposure remains a critical vulnerability, particularly in the office sector, where delinquency rates edged up to 1.28% in Q1 2025Commercial and Multifamily Mortgage Delinquency Rates Increased in First Quarter 2025^[6]. While Zions' CRE portfolio is not explicitly highlighted in the Jefferies report, the sector-wide trend of rising delinquencies—exacerbated by limited refinancing options—could pressure loan quality. Additionally, prolonged high interest rates risk flattening yield curves, compressing spreads and undermining NIM growth2025 Bank Stress Tests Reveal Resilience and Opportunity for Regional Banks^[5].

Valuation Metrics: A Value Play with Caveats

Zions' current valuation appears compelling. As of September 2025, the stock trades at a P/E ratio of 10.47, below its five-year average of 9.89 and significantly lower than peers like Western Alliance (11.7) and U.S. Bancorp (11.8)Zions Bancorporation (ZION) - P/E ratio^[7]. Its price-to-book (P/B) ratio of 1.29 further suggests a moderate premium to tangible equity, positioning it as a potential value stockZions Bancorporation, N.A. Price to Book Ratio 2010-2025^[8].

Jefferies' $60 price target implies a 6.03% upside from Zions' current price, a modest but achievable goal given the firm's revised growth assumptions. However, the target remains below the peer median multiple of 11.9x, reflecting cautious optimismZions Bancorporation, N.A. (NASDAQ:ZION) Stock Rating Upgraded by Jefferies Financial Group^[2]. For contrarian investors, Zions' undervaluation relative to peers could represent an opportunity, particularly if the bank continues to outperform in NIM expansion and loan growth.

Risk Considerations and Strategic Implications

While the upgrade signals improved confidence, investors must weigh several risks. First, Zions' reliance on net interest income exposes it to rate volatility. A sudden Fed pivot or inflationary shocks could erode margins. Second, CRE-related loan losses—though currently contained—could escalate if commercial property markets weaken further. Third, the bank's ability to deploy excess capital through dividends or buybacks will be critical in sustaining shareholder valueJefferies upgrades Zions Bancorp stock rating to Hold on improved growth outlook^[1].

Jefferies' upgrade appears to reflect a recalibration of Zions' trajectory rather than a full endorsement of its long-term potential. The firm's 10.4x target multiple, while higher than its previous 8.3x, still lags behind peer averages, suggesting residual skepticism. For investors, this creates a nuanced scenario: Zions' valuation and operational improvements hint at a contrarian opportunity, but sector-specific risks necessitate a measured approach.

Conclusion

Jefferies' upgrade of Zions Bancorporation underscores a shift in sentiment driven by strong earnings, NIM expansion, and improved growth outlooks. However, the move should be viewed through the lens of broader sector dynamics, where regulatory tailwinds and valuation gaps coexist with CRE risks and rate uncertainty. For investors, Zions' current P/E and P/B ratios, combined with its alignment with industry trends, present a compelling case for cautious optimism. Yet, the bank's ability to navigate macroeconomic headwinds and sustain its momentum will ultimately determine whether this is a contrarian gem or a lingering risk.