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Analyst Downgrades Wells Fargo from ‘Outperform’ to ‘Neutral’

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Sep. 12 2018, Published 11:51 a.m. ET

Rating downgrade

David Konrad, an analyst at Macquarie Research, has downgraded his rating on Wells Fargo & Company (WFC) from an “outperform” to a “neutral.” He’s reiterated the previous target price of $63 on the stock.

In a note to clients, Konrad wrote, “Due to compressing LIBOR spreads and rising funding costs, we believe industry is in the late stages of the NIM story with margins peaking in [the second quarter of 2019].” He also stated that banks are likely to provide cautious outlooks during their third-quarter earnings results.

Of the 32 analysts covering Wells Fargo, 16 have recommended “strong buys” or “buys” on the stock, 11 have recommended “holds,” and the remaining five have recommended “sells” or “strong sells” on the stock.

Wall Street’s target price of $62.31 represents an upside potential of ~8.6% from its current market price of $57.40.

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Peers’ ratings

Analysts are bullish about Wells Fargo’s top peers Citigroup (C), Morgan Stanley (MS), and Bank of America (BAC) and have provided consensus “buy” recommendations on these stocks. The one-year target prices of these stocks represent double-digit rises from their respective current market prices.

Six of the 28 analysts covering Citigroup have given it “strong buys,” 14 have given it “buys,” seven have given it “holds,” and one has given it a “sell.” Its target price of $83.52 represents a 20.6% increase from its current price of $69.42.

Four of the 26 analysts covering Morgan Stanley have given it “strong buys,” 13 have given it “buys,” and nine have given it “holds.” Wall Street’s target price of $59.75 represents a 25.6% increase from its current price of $47.69.

Seven of the 29 analysts covering Bank of America have given it “strong buys,” 14 have given it “buys,” and eight have given it “holds.” Its target price of $34.57 represents a potential 12.5% rise from its current market price of $30.80.

The Invesco KBW Bank ETF (KBWB) has allocated ~8.4% of its total holdings to Wells Fargo stock.

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