Bank of America (BAC) Smashed On Continued Fears
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Shares of Bank of America (NYSE: BAC) are under heavy pressure again today, trading down 16% to $6.00 - a new 52-week low, on fears the company may need to raise even more capital just days after getting a fresh $20 billion from the U.S. government.
Analysts at Friedman, Billings, Ramsey lowered their price target on BofA to $5 per share, saying tangible common equity is too low with questionable near-term profitability and credit costs.
On Friday, BofA reported a Q4 net loss of $0.48 per share and said Merrill Lynch's preliminary results indicate a fourth-quarter net loss of $15.31 billion. Bank of America also lowered its quarterly dividend to $0.32 to $0.01. The U.S. government made a further investment in Bank of America of $20 billion in preferred stock carrying an 8% dividend rate. In addition, the government has agreed to provide protection against further losses on $118 billion in selected capital markets exposure, primarily from the former Merrill Lynch portfolio.
Other Wall Street analyst also weighed in on Bank of America today. Stifel Nicolaus downgraded BofA from Buy to Hold today, noting the U.S. government's $49 billion in preferred shares equals about 35% of BofA's tangible equity. Deutsche Bank's Mike Mayo lowered his 2009 EPS est. by 35 cents to $1.00 and 2010 est. by 40 cents to $1.80 and lowered his price target to $10 per share. Oppenheimer's Meredith Whitney lowered 2009 EPS est. to $0.70 and 2010 est to $0.70 saying, "the company is as vulnerable as any as it interfaces with one in every two U.S. consumers."
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- Friedman, Billings, Ramsey
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