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​​Wells Fargo (WFC) stock forecast: Will its outperformance continue?

By  Yoke Wong

Edited by Vanessa Kintu

10:07, 27 January 2022

New York, New York, USA - May 31, 2012: A Wells Fargo sign at a Wells Fargo location in Midtown Manhattan. Manhattan buildings can be seen in the background.
​​Wells Fargo (WFC) stock forecast: Will its outperformance continue? – Photo: Shutterstock

US bank Wells Fargo’s (WFC) share prices spiked over the past two weeks as its fourth-quarter financial results exceeded market expectations, showing higher earnings and lower expenses.

The San Francisco-headquartered financial service provider’s share prices traded on the New York Stock Exchange (NYSE) jumped to $58.06 on 14 January, up 14.4% from $50.73 at the beginning of the year.

Although Wells Fargo’s share value has since fallen from this height and was last trading at $54 on 26 January, the stock price was 65.4% above the same time last year.

According to the Wells Fargo historical stock price, the bank’s share price hit a record high at $65.93 on 26 January 2018. The stock price also hit a low of $13.69 in January 2009 during the financial crisis.

WFC five-year stock price chart

Investors are impressed with the Wells Fargo stock performance over the past year, with investment guide website The Motley Fool issuing a ‘buy’ recommendation for Wells Fargo stock investment on 20 January.

According to Bram Berkowitz, a contributor on the site:

“Following the market’s reaction after three of the largest banks in the US reported earnings on 14 January, it was clear that Wells Fargo (NYSE: WFC) won the day with investors boosting the stock nicely, as Citigroup fell and JPMorgan Chase dropped more than 6%.

“Wells Fargo not only beat estimates soundly, but also gave guidance that suggested the bank will likely increase earnings in 2022, a feat that may not be so easy for its competitors.”

(Please note that Wells Fargo is an advertising partner of The Ascent, a Motley Fool service that “rates and reviews essential products for your everyday money matters”, according to the site.)

Are you interested to learn more about Wells Fargo stock market and the Wells Fargo future outlook? Read this Wells Fargo stock analysis to find out the latest Wells Fargo stock news and analysts’ Wells Fargo stock predictions.

Rising net income and falling expenses in fourth quarter

Post-Covid-19 economic recovery boosted Wells Fargo’s revenue across the US banks’ operating segments and its overall net income in the fourth quarter of 2021.

The bank’s net income for October to December 2021 jumped to $5.75bn, up 86% compared with the same quarter in 2020, as Wells Fargo’s Q4 earnings report, released on 14 January 2022, shows.

Wells Fargo’s non-interest expenses fell by 10.8% year-on-year to $13.2bn in Q4, but its provision for credit losses increased by more than 2.5 times to $452m. CEO Charlie Scharf stated: 

“As the economy continued to recover, we saw increased consumer spending, higher investment banking fees, higher asset-based fees in our Wealth and Investment Management business, and strong equity gains in our affiliated venture capital and private equity businesses. 
“We continued to manage credit well, and the strong economic environment helped reduce charge-offs to historical lows and our results benefitted from reductions in our allowance for credit losses.
“In 2021, we improved our financial returns, including reducing our expenses, and returning a significant amount of excess capital to our shareholders by increasing our dividend and repurchasing $14.5bn of common stock. We also had strong deposit growth and while loan demand was weak early in the year, loans grew 5% in the second half with growth in both our consumer and commercial portfolios.”

Wells Fargo Q4 financial summary in $ millions

The consumer-banking segment accounts for the biggest percentage (32%) of Wells Fargo’s net income in the fourth quarter, followed by corporate and investment.

Wells Fargo Q4 2021 net income/segment

The net income in the Consumer Banking and Lending segment increased to $1.86bn in Q4 2021, up 36.5% from the same quarter in 2020.

Within this segment, earnings in auto rose by 17% year-on-year because of higher loan balances, while personal lending fell by 9%. Home lending also fell by 8% year-on-year.

Higher point-of-sale volume lifted revenue from credit cards, which increased by 3% year-on-year.

The Consumer and Small Business banking segment generated $4.87bn revenue, up 4% compared to the same quarter in 2020. This was driven by “higher deposit-related fees reflecting lower fee waivers provided in response to the Covid-19 pandemic and an increase in consumer activity, including higher debit card transactions,” said Wells Fargo.

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Commercial banking

Net income in the Commercial Banking segment more than doubled to $954m in Q4 2021, up from $472m in the same quarter in 2020.

The rising net income was mainly because of a decrease in non-interest expense as part of the efficiency initiatives in the group. According to the company, “Non-interest expense decreased 10% to $1.39bn, primarily driven by lower personnel and consulting expenses due to efficiency initiatives and lower lease expense.”

The overall revenue increased by 1% year-on-year. Driven by higher deposit balances, as well as modestly higher investment banking fees, and partially offset by the impact of lower interest rates, earnings in the Middle Market Banking segment rose by 2% year-on-year to $1.17bn.

The Asset-based Lending and Leasing segment was up 1% to $1.12bn, driven by higher net gains from equity securities and higher revenue from renewable energy investments, partially offset by lower loan balances.

Corporate and investment banking

The net income of this segment jumped by 63.6% year-on-year to $1.45bn as earnings in banking surged.

The overall revenue rose by 11% year-on-year to $3.5bn, driven by a sharp earnings increase in banking.

“Banking was up 17% [to $1.36bn] primarily driven by higher debt origination and advisory fees, and higher loan balances, partially offset by lower deposit balances predominantly due to actions taken to manage under the asset cap,” said Wells Fargo.

Wealth and investment management

The net income of this segment increased by 11% year-on-year to $564m amid an increase in revenue and net client assets.

“Revenue increased by 6% [to $3.65bn], primarily due to higher asset-based fees on higher market valuations. Net interest income declined as a result of the impact of lower interest rates, partially offset by higher deposit and loan balances,” said Wells Fargo.

Total client assets increased by 9% to $2.18bn because of higher market valuations.

Corporate

Wells Fargo’s corporate segment turned profitable in Q4, generating a net income of $916m, compared with $144m losses in Q4 2020.

This was driven by a surge in the segment’s non-interest income, which generated $3.54bn earnings, more than double from $1.69bn in Q4 2020.

“Non-interest income increased predominantly driven by strong results in our affiliated venture capital and private equity businesses, and net gains of $674m and $269m from the sales of our Corporate Trust Services business and Wells Fargo Asset Management, respectively, partially offset by impairment of certain leased rail cars and lower fee income due to the sales of divested businesses,” said Wells Fargo.

WFC stock-price target

According to Market Beat, 13 out of the 16 Wall Street analysts surveyed indicated ‘buy’ for WFC stocks recommendations while three recommended ‘hold’ for the period up to 27 January 2022.

The average 12-month WFC stock price target is $56.56 with a 4.79% upside potential. In a positive scenario, analysts forecast WFC share price could reach $67 while it could also fall to $48 in a negative scenario.

Wells Fargo share price forecast

Forecast data provider AI Pickup’s forecast is bullish over the next 10 years, with Wells Fargo stock projections exceeding the 2018 record high of $66.39 this year and continuing in an upward trend to reach $97.54 in 2030.

In contrast, financial market technical analysis and forecasts provider WalletInvestor is bearish, expecting WFC stock prices to fall below $50 over the next four years.

The algorithm-based site forecasts the average WFC share price at $49.11 in the next 12 months, and the Wells Fargo stock forecast 2025 is projected to range from $35.858 to $41.385.

Note that analyst forecasts can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing, and never invest or trade money you cannot afford to lose.

FAQs

Is Wells Fargo stock a buy?

Whether Wells Fargo stock is a good buy or not will depend on your investing goals and portfolio composition. You should do your own research and never invest what you cannot afford to lose.

Why has the Wells Fargo stock price been going up?

Wells Fargo share prices have been rising over the past year as post-Covid economic recovery boosted consumer spending amid the bank’s initiatives of cutting expenses.

(When) will Wells Fargo stock go up/down?

Analysts are mixed about the forecasts of Wells Fargo stock price, with AI Pickup expecting prices to rise while WalletInvestor projects the share value to fall over the next four years.

Does Wells Fargo stock pay dividends?

The Wells Fargo board will decide if any dividends are payable based on the overall group profit. Wells Fargo declared a dividend of $0.20 a share payable on 1 December 2021, but please note not all shares are eligible for dividend payment.

Markets in this article

WFC
Wells Fargo & Co (Extended Hours)
59.33 USD
-0.05 -0.080%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
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