Compass Point Raises Wells Fargo Price Target at Neutral From Investing.com

Compass Point has a price target for on Tuesday Wells Fargo (NYSE:) raised from $57.00 to $60.00, but maintained a neutral rating on the stock. The adjustment is based on revised financial forecasts for the coming years. For fiscal 2024, the core earnings per share (EPS) estimate was increased from $5.16 to $5.45. For 2025, the forecast was raised slightly from $5.50 to $5.60.

The updated 2024 estimate takes into account an expected increase in fee income and lower loan loss provisions. These positive factors are partially offset by a forecast decline in core net interest income (NII).

The slight increase in 2025 EPS guidance is primarily based on expectations of higher core NII and improved net interest margin (NIM), as well as stronger fee income. These positive effects are partially offset by higher expected loan loss provisions and an increase in the average diluted share count, indicating lower share repurchases.

Compass Point sees several potential positive developments for Wells Fargo in the coming year. These include the possible removal of additional regulatory requirements, the elimination of the asset cap and large share buybacks. The latter could be supported by capital relief from a revised Basel III end-game proposal. However, analysts point out that the current valuation of Wells Fargo shares already appears to be taking these catalysts into account.

The analyst raises concerns about the impact of rate cuts on Wells Fargo’s NII and NIM. The bank shows relatively high interest rate sensitivity compared to other institutions monitored by Compass Point. This could hurt Wells Fargo’s performance relative to competitors, especially given the ongoing rate-cutting cycle. While the lifting of the asset cap is expected to provide a short-term boost, it is not expected until 2025.

In other recent news, Wells Fargo has received particular attention from analysts following its strong third-quarter results. Phillip Securities upgraded the stock to Accumulate from Neutral and increased the price target to $65.00 from $60.83. This was justified by expected growth in non-interest income as well as cost reductions and lower provisions.

The company also forecasts a 5% increase in the bank’s annual profit for fiscal year 2024. Citi also raised the price target on Wells Fargo from $63.00 to $67.00, while Piper Sandler and Baird raised the price target to 62 .00 US dollars raised.

The bank reported net income of $5.1 billion, beating expectations with earnings per share (EPS) of $1.42. Additionally, Wells Fargo conducted $3.5 billion in share repurchases and announced a 14% dividend increase in the third quarter. However, the bank’s core pre-tax profit recorded a decline of 7% year-on-year.

Evercore ISI revised upward their EPS estimates for Wells Fargo for 2025 and 2026, representing a 4% increase over official forecasts. Despite these developments, the bank has revised its full-year 2024 net interest income (NII) forecast to a probability of around 9%, in line with consensus estimates. Wells Fargo’s cost forecast remains unchanged at about $54 billion. These recent developments provide a final look at Wells Fargo’s financial performance and prospects.

InvestingPro Insights

Current data from InvestingPro complements Compass Point’s analysis of Wells Fargo (NYSE:WFC). The bank’s market capitalization is $207.96 billion, highlighting its significant position in the financial sector. Wells Fargo’s price-to-earnings (P/E) ratio is 12.87, indicating a relatively modest valuation relative to its earnings. This is consistent with Compass Point’s assessment that current stock prices may already be factoring in potential positive catalysts.

InvestingPro Tips highlights that Wells Fargo has paid dividends for 54 consecutive years, a testament to the company’s commitment to shareholder returns and complementing the potential share buybacks mentioned in the analyst report. Additionally, the indication that management is aggressively repurchasing shares confirms Compass Point’s expectation of significant share repurchase activity.

The bank’s strong performance is reflected in a total return of 56.26% last year. The stock is currently trading close to its 52-week high and is at 98.12% of the 52-week high. This performance data supports the analyst’s perspective on the current valuation of the stock.

For investors seeking more comprehensive analysis, InvestingPro offers 11 additional Wells Fargo tips that provide broader context for investment decisions.

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