A Wells Fargo bank branch
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Wells Fargo is looking strong after posting first-quarter results two weeks ago, prompting analysts to boost their price targets on the bank’s shares.
Deutsche Bank is the latest to lift its target on Wells Fargo’s (ticker: WFC) stock following a flood of increases on the day the bank posted results. Analysts at Deutsche Bank see Wells Fargo shares hitting $48 a piece over the next 12 months, up from previous projections of $45. The average price target of analysts surveyed by FactSet is $47.35, roughly 6% higher than recent trading levels.
In late morning trading on Monday, Wells Fargo shares were up 1.5%, to $44.52.
After a tumultuous 2020, Wells Fargo has emerged as somewhat of a favored pick among the big banks. The bank fared worse than peers during the worst part of the pandemic as it was still dealing with issues tied to its fake accounts scandal from 2016. The Federal Reserve in 2018 imposed a $2 trillion asset cap on Wells Fargo in response to the scandal. The cap limits Wells Fargo’s ability to issue new loans and otherwise grow, putting it at a disadvantage to peers.
But investors were encouraged by the bank’s recent earnings beat. While it’s not known when the cap will be lifted, Wells Fargo has moved decisively over the last year to get back in regulators’ good graces. The bank exited its asset management and student loan businesses earlier this year and has been working to become more efficient. Wells Fargo was one of the few banks to see shares gain when it reported earnings earlier this month as investors were encouraged that the bank was getting back on track.
“The 5.5% positive move in WFC post earnings for just so-so results supports the view that it’s a must-own stock in our view given an eventual lifting of the asset cap and as they are the second most levered bank to rising rates,” Matt O’Connor, analyst at Deutsche Bank, wrote in a note, adding that Bank of America (BAC) is also well-positioned for rising interest rates.
O’Connor expects that the bank’s 2021 earnings will be $4.88 a share, up from his previous projection of $4.33. The 55 cent jump is a result of Wells Fargo’s strong first-quarter results and the expectation that it will benefit from improved credit quality and more fee revenue on the back part of the year.
Wells Fargo shares are up 45% this year, outpacing the 28% gain in the KBW Bank Index (BKX) and the 11.5% jump in the S&P 500.
Write to Carleton English at [email protected]
