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On Wednesday, Evercore ISI analysts increased the price target for Wells Fargo (NYSE: NYSE:WFC) stock to $88 from $72 while maintaining an Outperform rating. Currently trading at a P/E ratio of ~13.4 and with a market capitalization of $246 billion, the stock has delivered a 32% return over the past year. This adjustment follows the Federal Reserve’s decision to lift Wells Fargo’s $2 trillion asset cap that was imposed in 2018.
The Federal Reserve announced that Wells Fargo has fulfilled all the conditions required by the 2018 enforcement action for the removal of the growth restriction. However, the 2018 consent order containing the cap remains in place pending the satisfaction of termination requirements. According to InvestingPro, Wells Fargo has shown strong financial discipline, maintaining dividend payments for 55 consecutive years while delivering robust returns.
The lift of the asset cap is expected to have a modest positive impact on Wells Fargo’s shares in the near term, as the move was widely anticipated. Evercore ISI analysts expressed optimism about the longer-term outlook for Wells Fargo’s shares, anticipating a shift in investor focus towards earnings implications over time. InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report.
The analysts foresee potential significant earnings per share upside in the long term, estimating an 18% annual increase. With current earnings per share at $5.57 and analysts forecasting $5.67 for FY2025, they view the asset cap lift as a crucial step for Wells Fargo to accelerate bottom-line growth and achieve peer-leading return on tangible common equity and operating efficiency.
In other recent news, Wells Fargo & Company has made significant strides in addressing regulatory challenges and streamlining its operations. The Federal Reserve has lifted the asset cap imposed on Wells Fargo since 2018, marking a substantial development in the bank’s efforts to enhance its compliance and governance. This progress was verified through independent reviews and assessments by the Federal Reserve. In a move to simplify its business operations, Wells Fargo has also agreed to sell its rail equipment leasing division to a joint venture formed by GATX (NYSE:GATX) Corporation and Brookfield Infrastructure (NYSE:BIPC). The transaction, valued at approximately $4.4 billion, is expected to close by the first quarter of 2026.
Additionally, Wells Fargo announced the termination of the Office of the Comptroller of the Currency’s 2015 agreements, a step forward in resolving longstanding regulatory issues. This marks the thirteenth consent order closed by Wells Fargo’s regulators since 2019. The bank has also rewarded its employees with a special one-time award of $2,000, primarily in restricted stock grants, to acknowledge their contributions during challenging times. The financial community is closely watching Wells Fargo’s ongoing efforts to comply with regulatory standards and improve its overall performance. These recent developments underscore Wells Fargo’s commitment to transforming its operations and focusing on core client services.
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