Bank holding company, Wells Fargo & Company (
WFC ) was downgraded to "Neutral" on Monday by
Analysts at Compass Point downgraded WFC from a "Buy" to
"Neutral" Monday with a price target of $37, a 10% decrease from
the previous target of $41. The new price target, suggests a 7.4%
increase from the stock's closing price of $34.25 Friday, and a
25.5% increase from the YTD price of $27.56.
Although the price target has been lowered, Compass Point
believes that WFC has a good chance of turning around the decline
in the long term. Factors such as economic growth an rising
interest rates may help the company, but they will only achieve a
higher price target if they are able to successfully save on
A Compass Point analyst stated, "It has become apparent that the
company will have a difficult time showing meaningful earnings
growth in the next year due to: (1) interest rates at historic
lows, (2) 13% of the loan portfolio in run-off and (3) expenses
above a $12 billion quarterly run rate. Furthermore, the company's
recent decision to keep conforming mortgages on the balance sheet,
versus selling to the GSEs, illustrates the predicament WFC finds
itself in. The company does not want to turn away deposits because
they could prove to be valuable when rates are higher, but needs to
find a place to park the excess liquidity. If they buy MBS
securities, they risk premium amortization from ultra-low rates,
but if they put it on their balance sheet, they are taking greater
duration/interest rate risk. Either way, this dynamic makes it very
difficult for WFC to grow its top-line."
Wells Fargo shares were mostly flat during premarket trading
The Bottom Line
Shares of Wells Fargo ( WFC ) have a 2.57%
dividend yield, based on Friday's closing stock price of $34.25.
The stock has technical support in the $30-$32 price area. If the
shares can firm up, we see overhead resistance around the $36-$37
Wells Fargo & Company ( WFC ) is not
recommended at this time, holding a Dividend.com DARS™ Rating of
3.3 out of 5 stars.
Be sure to visit our complete recommended list of the Best Dividend Stocks , as well
as a detailed explanation of our ratings system here .