- Shares of Wells Fargo & Co (NYSE: WFC) have received a price target increase from $27 to $31 by DA Davidson. These are the details.
Shares of Wells Fargo & Co (NYSE: WFC) have received a price target increase from $27 to $31 by DA Davidson. DA Davidson analyst David Konrad also upgraded the stock to “Buy” from “Neutral.”
Konrad had cited a discounted valuation of the stock at 78% of its tangible book value and believes that the company is trading at a 40% peer-discount on an expected 2022 pre-provision net revenue basis, according to TheFly. And Konrad noted that Wells Fargo’s positive catalysts include a steepening yield curve and a resumption of buybacks expected in H2 2021 along with cost reductions and sales of its higher cost businesses.
Shares of the company are up more than 13% since the company reported its third-quarter results about a month ago. For the quarter, the company reported EPS of 42 cents, which is up from a loss of 66 cents in Q2. And revenue for the quarter increased to $18.9 billion in Q3 2020 compared to $17.8 billion from the previous quarter.
“Our third-quarter results reflect the impact of aggressive monetary and fiscal stimulus on the US economy,” said Wells Fargo CEO Charles Scharf in a statement about the earnings last month. “Strong mortgage banking fees, higher equity markets, and declining sequential charge-offs positively impacted our results, while historically low interest rates reduced our net interest income and our expenses continued to remain elevated.”
Wells Fargo put $769 million aside for credit losses in Q3, which is substantially lower than analyst estimates of over $1.75 billion and down significantly from the $9.5 billion set aside in Q2.
Noninterest income for Wells Fargo was $9.5 billion due to deposit, card, and investment fees all growing on a quarter-over-quarter basis. And mortgage-banking income increased to $1.6 billion from $317 million in the second quarter.
The stock price of Wells Fargo is currently trading at about half of what it was during the early stages of the pandemic. The last time I saw the Wells Fargo stock price drop by this much was during the Great Recession of 2007-2008. It took Wells Fargo about four years to get back to the stock price of where it was before getting hit by the Great Recession. Now the stock price of Wells Fargo is trading at about 37% lower than what it was as of February 28, 2020. This could represent a potential buying opportunity for long-term investors.
Disclosure: Currently I do not have WFC in my stock portfolio, but I plan to buy a small number of shares this year and next year for diversification purposes.