Wells Fargo’s shares sank after the bank reported poor-to-expected results this week, but they are rising after the lender was upgraded by Evercore ISI on Wednesday.
Analyst John Panchari raised his rating on Wells Fargo (WFC) from outperform to outperform, saying that the bad news has re-established expectations. They raised their target for the stock price from $ 1 to $ 27. The stock rose 4.1% to $ 25.24 in morning trading.
Panchari wrote, management’s decision to reduce dividends and increase its reserves “helps clear the deck on capital and credit uncertainty, while pending spending actions settle well for earning power,” Panchari Wrote
The massive expected cuts to pay for Wells Fargo were certainly a big part of the reason the stock fell on Tuesday. Panchari said, however, that investors should welcome the move as it means management is exiting the front of painful moves and will have to take it at some point.
The analyst wrote, “The cuts are prudent in light of widespread macro uncertainty and pressure accrued to Kovid and potential restructuring and regulatory fees.” The same is to increase its debt reserves, given that the epidemic is likely to cause losses on debt.
Panchari also said that he was happy with the management’s comment about cost savings, noting that Wells Fargo could now afford less through next year.
“Fundamentals remain particularly under pressure on the WFC, but we are encouraged by management’s decisive actions on capital and debt, and an emerging commitment to deal with Wales ‘returns through Wales’ spending capacity,” he said. concluded. “The battle is likely to be a protracted one and revenue headwines remain a dull factor, but we believe the tide is turning on Wales core principles.”
At the same time, ignoring stocks is getting cheaper. With shares at 53% this year, Wells Fargo is trading comfortably 10 times below expected earnings next year.
Investors’ expectations about banks were low during the earnings season, and Wells Fargo is one of the group’s more troubled names. If the company has received as much bad news as it has received in this quarter, it may gain the support of other analysts who are more interested in distressed stocks.
Write Teresa Rives at [email protected]