Odeon Capital Upgrades Wells Fargo (WFC) to Buy, says selling at a discount to book value

Odeon Capital analyst Dick Bove upgraded Wells Fargo (NYSE: WFC) from Hold to Buy with a price target of $44.60.

The analyst comments "Wells Fargo reported first quarter earnings of $1.26 per share. This compares to an estimate of $1.12 per share and Q1 2022 earnings of $0.91 per share. While the bottom line was impressive, a closer look at the underlying numbers was less impressive. The elimination of a meaningful charge in the third quarter combined with an increase in trading results allowed the bank to produce a strong result. The company’s business moved away from traditional banking to some extent in the quarter. It is unclear whether this was simply the result of broader market forces or if there has been a management decision to reset focus on the payment systems and capital markets sector. It is possible since all of the bank’s dilemmas in the past decade have been associated with banking, that the allure of this business has dimmed. Rather than fight the battle to eliminate the hold on growing its assets Wells may simply prefer to shrink banking and its assets to pursue higher growth industries that are less capital intensive. It is actually relatively tough to recommend this stock. The positive is that the issue is selling at a discount to book value. This would not make sense if the bank is edging away from capital intensive businesses to more agency-like functions. Under the assumption that this is the case, it appears to me that the issue will rise back above book value, and this is why the issue is rated a buy. Earnings wise this is expected to be a tough year for the bank."

For an analyst ratings summary and ratings history on Wells Fargo click here. For more ratings news on Wells Fargo click here.

Shares of Wells Fargo closed at $39.64 yesterday.

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