Wells Fargo's stock has reached a fair price after runup, analyst says

By Steve Gelsi

Citigroup cuts Wells Fargo rating to neutral on 'balanced' risk/reward but boosts price target

Citi has downgraded Wells Fargo & Co. to neutral from buy after a quick gain in its stock price this year relative to its expected performance.

Citi analyst Keith Horowitz said Wells Fargo (WFC) is now trading at a premium relative to its peers.

He hiked his price target for Wells Fargo to $63 from $57 on expectations of a higher, normalized return on tangible common equity, based on his view that federal regulators may pare back proposed capital requirements under the Basel III endgame regime. The stock closed at $57.01 on Tuesday.

"We believe the risk/reward is fairly balanced," Horowitz said in a research note issued late on Tuesday.

Before Wednesday's trades, Wells Fargo's stock rose 15.8% in 2024, outpacing the 13.9% rise by JPMorgan Chase & Co. (JPM) and a 14.4% jump by Citigroup Inc. (C) over the same time. The S&P 500 Index SPX is up 8.6% year-to-date and the Financial Select Sector SPDR Fund XLF has risen by 9.2%.

"WFC has been one of our top picks among the G-SIBs [global systematically important banks] largely due to potential for earning per share revisions, but we think this is now largely priced into the valuation," Horowitz said.

The bank will continue to benefit from tailwinds from fixed asset repricing, growth across fee categories and improved efficiency, Horowitz said.

Wells Fargo stock fell by 0.7% on Wednesday.

Also read: Morgan Stanley upgrades Bank of America, Goldman Sachs and Citi on 'lightened up' Basel III capital requirements

-Steve Gelsi

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03-20-24 1310ET

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