Tuesday, Wells Fargo & Company (NYSE:WFC) saw its stock rating change as Compass Point moved its stance from Buy to Neutral. The firm set a price target for the bank's shares at $64.00.
The adjustment comes in light of expectations for a modest earnings per share (EPS) beat, influenced by a slightly lower provision, which a modest decrease in revenue could somewhat offset.
Wells Fargo's shares have experienced significant outperformance following the fourth quarter results of 2023, propelled by several factors, including the removal of an OCC consent order on sales practices, persistent high inflation data, and the potential revision of the B3 End Game proposal, which might imply capital relief for the bank.
Despite these positive developments, the analyst does not anticipate major surprises in the first quarter earnings. However, a possible positive revision to the net interest income (NII) guidance is noted, due to fewer expected rate cuts. This revision would likely not come as a surprise to the market.
On the upside, fee trends are expected to remain strong, bolstered by strong trading and a solid performance in wealth management for the first and second quarters of 2024, thanks to favorable equity market trends lifting fees.
Compensation expenses are projected to increase seasonally, but this should be mitigated by the absence of significant severance expenses incurred in the fourth quarter. Furthermore, credit normalization is continuing, with any reserve build likely to be minimal. The bank's share buybacks could also see an uptick compared to the previous quarter due to the cessation of a special assessment.
InvestingPro Insights
Compass Point's recent rating change for Wells Fargo & Company (NYSE:WFC) to Neutral, accompanied by a $64.00 price target, reflects a cautious optimism in the face of modest earnings expectations. This sentiment is echoed by the InvestingPro data, which shows Wells Fargo with a robust market capitalization of $204.6 billion and trading at an attractive P/E ratio of 11.88, suggesting value relative to near-term earnings growth. The bank's revenue growth over the last twelve months stands at 5.99%, indicating a steady financial performance.
InvestingPro Tips highlight Wells Fargo's strategic share buybacks and its status as a significant player in the banking industry, with a history of maintaining dividend payments for over half a century. Notably, analysts have revised their earnings downwards for the upcoming period, which could temper expectations. On the other hand, the bank's strong return over the last year and its position near the 52-week high point to a positive momentum, with an impressive 57.35% one-year price total return.
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