On Monday, CFRA maintained its Hold rating on shares of Wells Fargo (NYSE: WFC) but increased the stock's price target from $49.00 to $59.00. The adjustment reflects a revised earnings per share (EPS) forecast, with the 2024 estimate now at $5.00, up $0.07, and the 2025 projection increased by $0.11 to $5.39.
The decision to raise the target price is based on a multiple of 10.9 times the anticipated 2025 EPS, which is below the 10-year historical average of 15.3 times. This valuation accounts for the bank's modest growth expectations. Wells Fargo's share performance has been strong following its fourth-quarter results, attributed to the robust and resilient U.S. economy from which the bank is benefiting.
Despite the positive performance, CFRA notes that if the economic landscape deteriorates, Wells Fargo's solid capital foundation, with a Common Equity Tier 1 (CET1) ratio of 11.4%, and its substantial credit loss allowances, which stand at 1.61% of total loans, provide a cushion.
Additionally, the bank has seen progress on the regulatory side. The Office of the Comptroller of the Currency recently lifted a consent order issued in 2016 related to sales practices misconduct. This order had mandated Wells Fargo to overhaul its consumer product offerings and sales methods and to implement further measures to safeguard customers and employees.
InvestingPro Insights
As Wells Fargo (NYSE: WFC) continues its journey toward regulatory compliance and capitalizes on the robust U.S. economy, InvestingPro data and tips provide a deeper understanding of its financial health and market position. With a market capitalization of $203.89 billion and a P/E ratio sitting at a modest 11.77, the bank is trading at a low P/E ratio relative to near-term earnings growth, indicating potential value for investors. Additionally, Wells Fargo has shown strong return metrics, with a one-year price total return of 60.01% and a significant price uptick over the last six months of 44.12%, reflecting investor confidence and market performance.
InvestingPro Tips highlight that management's aggressive share buybacks and the fact that the company has maintained dividend payments for 54 consecutive years demonstrate a commitment to shareholder returns. Moreover, as a prominent player in the Banks industry, Wells Fargo's profitability over the last twelve months and analysts' predictions of continued profitability this year offer reassurance to investors considering the stock.
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