Tesla Stock – Wall Street Is Still Betting on Wells Fargo Stock
Wall Street continues to post its hopes on
Analysts’ support for the stock began to grow during the summer, after the San Francisco-based bank posted a loss in the second quarter of 2020. The general thinking on The Street was that while all banks were hampered by the economic climate, Wells Fargo (ticker: WFC) had specific problems to fix and a recently installed management team intent on fixing them.
As a result of the lender’s fake-accounts scandal, Wells Fargo has been operating under a Federal Reserve-imposed cap on the amount of loans and other assets it can hold. Management is working to have the cap removed, but the bank has also cited opportunities to cut costs, which could help the shares.
Still, the stock was little changed for much of the back half of 2020. It all changed in November, when bank shares shot up in response to a positive vaccine data and a steepening yield curve, or wider gap between yields on short- and long-dated debt. A steeper curve benefits banks because it means a bigger differential between their cost of funds and what they receive on loans such as mortgages.
Wells Fargo shares, under pressure for some time, outpaced peers during the recovery.
Even with the stock’s outsize recent gains, analysts see more room for the stock to advance.
upgraded the shares to Outperform from Neutral Monday and lifted its target for the price to $40 apiece from $35. The analysts were encouraged by Wells Fargo management discussing plans to cut $8 billion in costs over the next few years and considering sales of its asset-management and corporate trust businesses.
“Simply put, we asked for targets and supporting disclosure to increase clarity on the path to improved returns; both were delivered with fourth quarter results,” Susan Roth Katzke, analyst at Credit Suisse, wrote Monday.
“To be sure, the path forward has its obstacles and revenue growth remains a challenge, but the combination of evident progress, incremental investment, excess capital and the inherent franchise opportunity reduce the downside risk and render the aspiration of a 15% ROTE achievable, in time,” she added, referring to return on tangible equity.
Wells Fargo shares were down 0.1% in afternoon trading Monday, matching the drop in the
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