The Federal Reserve has yet again increased the short-term interest rate. Ordinarily, higher rates should be good for bank stocks. But we think it's time to turn bearish on Bank of America (BAC) .
The reasons for this are purely technical. First, Bank of America has outperformed its peers so far this year, and this might set off a correction.
Second, at $25 a share, there is little upside left in the Brian Moynihan-led company.
Third, Bank of America trades at expensive valuations relative to its growth and competitors.
The company's recent performance has been encouraging. Bank of America's stock gained nearly 14% year-to-date (YTD) and 61% over the past six months.
By comparison, Citigroup (C) has risen 2.3% YTD and 30% in the past six months. Rival JPMorgan (JPM) has seen its share rise by 6.3% YTD and 38% in the past six months. And Bank of America has also beaten peers like Goldman Sachs (GS) and Wells Fargo.
The stock is only expected to move up at most another dollar. The 30 analysts providing 12-month price estimates for Bank of America have a median target of $26.