Analysts cheer Wells Fargo to 2018 highs after earnings. We have 1 qualm with the praise
Wells Fargo stock hit new multi-year highs on Monday after Wall Street analysts praised the bank's third-quarter earnings report. The news Shares of Club name Wells Fargo jumped more than 3% on Monday ? a close above $63 would be the highest finish since January 2018. That's on top of Friday's more than 5.6% post-earnings rally, which extended its recent run to six straight sessions. Investors are mulling a slew of positive analysts' calls after Wells Fargo's better-than-expected quarterly earnings . While missing on revenue, the bank impressed with a surge in fee-based income streams that offset weakness in other parts of the business. WFC 5Y mountain Wells Fargo 5 years In response, Barclays raised Wells Fargo's price target to $75 apiece from $66 on Sunday, implying roughly 23% upside from Friday's prior close. The analysts cited both "increased confidence of a soft landing" and "improvements in operational risk and compliance, which should ultimately lead to [the] removal of its asset cap," which was imposed by the Federal Reserve in 2018 following misdeeds before Charlie Scharf took over as CEO. Barclays maintained its buy-equivalent rating on the financial name. Piper Sandler hiked its Wells Fargo price target slightly to $62 from $60. "We are keeping our neutral rating, but note that the story becomes more interesting as net interest income begins to find its bottom, the fee base gains momentum, and regulatory issues seem to move forward," analysts wrote in a Friday note. Big picture Big bank earnings are off to a great start. Not only did Wells Fargo post solid results, but so did JPMorgan Chase . On Friday, the Jamie Dimon-led bank topped analysts' expectations on earnings and revenue on continued strength in non-interest income streams. Wall Street behemoths including Bank of America, Citigroup and Goldman Sachs are set to post results before Tuesday's bell. The Club's other financial name, Morgan Stanley, releases earnings on Wednesday morning. Getting a look at Goldman Sachs' quarter and then Morgan Stanley should be interesting. Although Jim has previously said the Club would rather be in Goldman than Morgan Stanley, we're taking a wait-and-see approach to the stock. That's because Morgan Stanley can turn things around if Wall Street dealmaking picks up and eventually boosts the firm's investment banking business. Bottom line We're not surprised that Wells Fargo's getting the recognition it deserves. After the earnings release. the Club on Friday raised our price target on the bank to $66 per share from $62. We also reiterated our buy-equivalent 1 rating on the stock. "What an amazing quarter," Jim Cramer said Monday. "Friday was Charlie Scharf's day." Similar to the Wall Street analysts, we're upbeat on the progress Wells Fargo is making toward convincing the Fed to lift the $1.95 trillion asset cap. The removal of this growth lid is crucial to Wells Fargo's turnaround story and a big reason why the Club invested in the stock in the first place. In fact, in Jim's Sunday column , he argued that Wells Fargo's earnings report may be the best of the batch so far. He said he was "astounded that Wells Fargo had been able to start changing its business model to the point where it was more of an investment bank" than previously thought. That's why we do have one qualm with Piper Sandler's commentary, in particular. We don't agree with the research firm's choice to leave the stock at a hold-equivalent rating. (Jim Cramer's Charitable Trust is long WFC, MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Wells Fargo bank signage is seen on Broadway on April 12, 2024 in New York City. Michael M. Santiago | Getty Images
