Wells Fargo Shares Soar on Analyst Upgrade and Yellen Nomination for Treasury Secretary
Wells Fargo saw its stock rise on Tuesday after receiving analyst upgrades and President-elect Joe Biden nominating Janet Yellen for Treasury secretary.
If confirmed by the Senate, Yellen, who is a former Federal Reserve chair, would be the first woman to hold the position.
Raymond James has raised its rating on Wells Fargo from “underperform” to “outperform” and analyst David Long has given shares a $32 price target.
Long said he was upgrading Wells Fargo to outperform from underperform “as headwinds stemming from the account opening scandal that broke more than four years ago begin to rescind.”
Long said he now believes “that its pretax pre-provision income has troughed, revenue is nearing a bottom, a multi-year expense rationalization initiative can finally be taken on, and repurchase activity can return in the near future.”
“Altogether, we now see numerous positive catalysts for the bank in the near to intermediate term; thus, we believe the steep discount WFC shares trade at compared to peers on a Price to Tangible Book Value (P/TBV) basis represents an attractive entry point for investors,” Long added.
Long also raised his 2020 earnings estimate by 8 cents to 21 cents a share, his 2021 estimate by 22 cents to $1.63, and his 2022 estimate by 18 cents to $2.78.
Raymond James analyst Ed Mills has said that Yellen’s selection is a “clear market and economic positive,” and points to a focus on economic recovery over regulatory policy.
Mills added that “more regulatory-minded Democrats” probably won’t oppose her selection as she’s overseen tough stress tests, levied enforcement actions against Wells Fargo, and supported the Fed’s restriction on buybacks and limitations on dividends in response to Covid-19.”
Earlier in the month the Securities and Exchange Commission charged former Wells Fargo CEO John Stumpf with misleading investors about the success of the bank’s core business.
Stumpf has settled the charges without admitting or denying them and agreed to pay a $2.5 million penalty.
Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.