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Are More Downgrades in Store for Wells Fargo?

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Analysts’ ratings

Wall Street analysts have been critical of Wells Fargo (WFC) after news of the fraudulent accounts scam broke out. Most analysts (XLF) believe that a scandal like this could lead to a fall in the bank’s valuations (BAC) (JPM) and tarnish its image.

Wells Fargo’s cross-selling ability has driven its premium valuations in the past. But after this scam, it might have to make changes to its business model. Overall, 51% of analysts have rated Wells Fargo a “buy,” while 32% have rated it a “hold.” About 16% of analysts have assigned a “sell” rating to the bank. Wells Fargo has a 12-month price target of $50.70, indicating a 14.5% upside potential.

Recently, analyst David Long at Raymond James cut the stock’s rating to “underperform” and reduced his earnings estimates. He also cut EPS (earnings per share) estimates to $4 per share this year from $4.12 last year and to $3.94 for 2017.

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Rafferty Capital analyst Dick Bove said significant damage was done to Wells Fargo’s business model, warranting a downgrade. He downgraded the bank to a “sell” and assigned a price target of $44. Barclays (BCS) cut Wells Fargo’s price target from $61 to $58. It currently rates Wells Fargo “overweight.”

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