Shares of IberiaBank Corp. fell Tuesday after a Robert W. Baird & Co. analyst downgraded the stock to "Neutral" from "Outperform," due to its current valuation.
Shares shed $2.87, or 4.7 percent, to $57.67. Shares have traded between $37.44 and $70.66 in the past 12 months.
"The SEC's short-selling ban artificially helped to lift stock prices of smallcap banks to valuations generally not supported by current or expected fundamentals," wrote analyst Bryce Rowe in a note to clients.
The Securities and Exchange Commission's temporary ban on the short selling _ or betting that a stock will fall _ of nearly 800 financial firms, as well as initial positive reaction to the government's proposed bailout plan, led to a significant rally in bank stocks lately. IberiaBank shares rose 8 percent last week and are up about 45 percent since mid-July.
"Current valuations leave little margin for error, but more importantly, we believe longer-term prospects for profitability are not as rosy as valuations suggest," Rowe said.
The SEC's short-selling ban will expire on Oct. 2, but can be extended up to 30 calendar days if deemed necessary. Rowe suggested investors use this opportunity to trim or eliminate positions in the stock.
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