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On Wednesday, Morgan Stanley (NYSE:MS) adjusted its outlook for Wells Fargo (NYSE: NYSE:WFC), increasing the price target to $87 from $77 while maintaining an Overweight rating. Currently trading at $75.65, the $246 billion banking giant appears undervalued according to InvestingPro analysis. The revision reflects expectations of accelerated loan and deposit growth, along with reduced expenses.
The analysts at Morgan Stanley anticipate Wells Fargo’s earnings per share (EPS) to rise in the coming years. They project a 3-cent increase for 2025, bringing EPS to $5.61, a 24-cent increase for 2026 to $6.67, and a 52-cent increase for 2027 to $8.13. The adjustments are based on anticipated average loan growth of 3.0% in 2026 and 3.9% in 2027, aligning more closely with industry norms. The bank’s current P/E ratio of 13.4x appears attractive relative to its growth prospects, with analysts maintaining a consensus "Buy" recommendation.
In addition to the growth forecasts, Morgan Stanley has adjusted its expense growth projections for Wells Fargo. The firm now expects expense growth to slow to 0.4% in both 2026 and 2027, down from previous estimates of 1.4% and 1.5%, respectively.
The price target increase to $87 is based on a 13x target price-to-earnings (PE) ratio applied to the 2026 EPS forecast of $6.67. This represents an increase of one turn over the previous multiple, reflecting Wells Fargo’s anticipated faster growth and improved return profile.
Morgan Stanley’s updated outlook underscores its confidence in Wells Fargo’s ability to capitalize on its growth strategies while maintaining cost discipline. The stock has demonstrated strong momentum with a 32% return over the past year, while maintaining a healthy 2.1% dividend yield. For deeper insights into Wells Fargo’s valuation and growth prospects, including exclusive ProTips and comprehensive financial analysis, visit InvestingPro.
In other recent news, Wells Fargo has seen significant developments following the Federal Reserve’s decision to lift the asset cap imposed by a 2018 consent order. This decision came after Wells Fargo satisfied all necessary conditions, including improvements in governance and risk management, verified by independent review. The removal of the asset cap is expected to allow Wells Fargo to increase commercial deposits and utilize more of its balance sheet for trading growth. Analysts from Evercore ISI, Keefe, Bruyette & Woods, and Goldman Sachs have responded positively, with Evercore ISI raising its price target to $88 and maintaining an Outperform rating, while Keefe, Bruyette & Woods adjusted their target to $80. Goldman Sachs continues to hold a Buy rating with a price target of $76, noting potential earnings increases and enhanced return on tangible common equity. Meanwhile, Citi maintains a Neutral rating with a price target of $78, acknowledging the positive impact of the asset cap removal but cautioning that other consent order conditions remain. Wells Fargo has also announced a special one-time award of $2,000 in restricted stock grants to its employees, recognizing their contributions during this transformative period. CEO Charlie Scharf highlighted the company’s strengthened position and improved financial profile as a result of these efforts.
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