Wells Fargo & Co: It’s hard to ignore the bright spots

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I am neutral on Wells Fargo & Company (NYSE: WFC) as its support from Wall Street analysts and a decent rise from its consensus price target is offset by its recent weak fundamental performance and slightly elevated valuation multiples.

Wells Fargo & Company is a multinational financial corporation providing banking, investment, mortgage, insurance, and financial services to individuals and businesses. Its headquarters are in San Francisco, California. The company was founded in 1929 by Henry Wells and William Fargo.

Strengths

Wells Fargo has operations in 35 countries and serves more than 70 million customers around the world. The Financial Stability Board considers it to be a systemically important financial institution.

The company’s main subsidiary, Wells Fargo Bank, NA, is the fourth largest bank in the United States in terms of total assets and is also one of the largest in terms of market capitalization and total assets.

The bank is also one of the Big Four banks in the United States along with JPMorgan Chase, Bank of America and Citigroup. The bank has approximately 8,050 branches and operates 13,000 ATMs.

Recent results

Wells Fargo reported total revenue of $ 18.834 billion in the third quarter of 2021 ended September 30, 2021. This shows a decline from the same period a year earlier when Wells Fargo generated $ 19.316 billion ; however, it is still slightly above analysts’ expectations of $ 18.35 billion. Profit was $ 1.17 per share and increased 67% year-over-year.

The banking and consumer credit segment recorded a 4% drop in revenue to $ 8.8 billion year-on-year. Commercial Banking segment revenue declined to $ 2.1 billion, a decrease of 7%.

The Corporate and Investment Banking segment recorded revenue growth of 2% to $ 3.4 billion year-on-year. Wealth and Investment Management revenue increased 10% to $ 3.6 billion, while the Corporate segment generated revenue of $ 1.3 billion, a decrease of 20% .

As of September 30, 2021, the company owed loans of $ 854 million, deposits of $ 1,450.9 billion and assets of $ 1,949.7 billion.

Analysts expect the company to report earnings per share of $ 1.39 in the last quarter of 2021.

Assessment measures

The WFC stock looks slightly overvalued at the moment as its P / S ratio is 2.7x its five-year average of 2.6x, its P / E ratio is 13.2x its average over five-year 12.8x, and its dividend yield is 1.8% over its five-year average of 3.2%.

The Taking of Wall Street

From Wall Street analysts, WFC obtains a moderate buy analyst consensus based on nine buy ratings, four hold ratings and no sell ratings in the past three months. Additionally, Wells Fargo’s average price target of $ 54.80 places the upside potential at 13%.

Summary and conclusions

Well Fargo is a leading name in the banking and financial services industry. That said, her brand has been tarnished significantly in recent years as she has faced major scandals in dishonest dealings with customers.

In addition, the share price performance has been weak during this period as its fundamentals have suffered.

Looking ahead, the stock doesn’t look particularly cheap, but it doesn’t look overly expensive either, especially compared to the broader stock market and historically low interest rate environment.

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Disclosure: At the time of publication, Samuel Smith does not have a position in any of the titles mentioned in this article.

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