NEW YORK (AP) -- Shares of Bank of America Corp. fell in premarket trading on Tuesday after an analyst lowered his rating on the company, citing the recent rise in its stock price.
Baird's David George reduced Bank of America to "Neutral" from "Outperform," but raised his price target on the shares to $10 from $9.
George said in a client note that Bank of America's stock has risen 80 percent in 2012, while the broader Standard & Poor's 500 index is up 12 percent in the same period.
He said that BofA's stock had probably dropped too far before the recent rally — it bottomed at $4.92 in December 2011. But he recommended that investors not buy the stock at higher prices, because the company's ability to increase earnings is limited by super-low interest rates.
Investors had sold the stock late last year because of worries that Bank of America would have to raise more funds to bolster its capital levels. CEO Brian Moynihan has been shedding assets and businesses that aren't essential to the company, and Bank of America sold 400 million common shares and issued $2.3 billion in debt in December. Issuing stock can make each existing stockholder's stake less valuable.
But on March 13 the Federal Reserve said that Bank of America passed a stress test, meaning the Fed believes it has enough capital to survive a downturn worse than the Great Recession. BofA's stock has gained 17 percent since then.
Bank of America's stock fell 13 cents, or 1.3 percent, to $9.80 before the market opened Tuesday.
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