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WFC

Wells Fargo to post quarterly numbers April 13

What's Happening

Wells Fargo ( WFC ) will report its first-quarter numbers before the market open on April 13, with the consensus calling for earnings of $0.97 per share, versus $0.99 during the same period last year. The stock has lost 2.3% on the year.

Technical Analysis

WFC was recently trading at $54.71, down $5.28 from its 12-month high and $11.16 above its 12-month low. Overall technical indicators for WFC are bullish with a possible trend reversal. The stock has fallen below recent support, and recent resistance below $56.50. Of the 25 analysts who cover the stock, eight rate it a "strong buy", two rate it a "buy", 11 rate it a "hold", and four rate it "strong sell". The stock receives S&P Capital IQ's 3 STARS "Hold" ranking.

Analyst's Thoughts

Wells Fargo is coming off an all-time high in reaction to fears over President Trump's ability to follow through on some of his biggest campaign promises. After failing to accomplish possibly his biggest promise, repealing Obamacare, analysts are fearful that he will have an even harder time getting tax reform through Congress. Tax reform is definitely not the only reason the market, and the financial sector in particular, rose to new record levels after the election, but it played a major role, and as such the overall market has cooled off a bit since the Obamacare repeal fell through. Rising interest rates are another component to the financial sector's sector, with the Federal Reserve boosting rates twice since December, and expected to lift rates a couple more times through the remainder of the year. Higher rates are great for banks, since they are able to widen the spread on the money they borrow versus the money they lend. As a result, analysts expect nice earnings growth for the big banks moving forward. Wells Fargo is expected to grow its earnings by a modest 3.7% this year, but in 2018 growth is expected to accelerate to 9.5%. Combined with a P/E of 13.7, these growth estimates should be enough to drive the stock higher. I like the sector, and the sector leaders in particular, and very Wells Fargo a solid buy at its current valuation.

Stock Only Trade

Bullish Trade

If you want a bullish hedged trade on the stock, consider a June 45/50 bull-put credit spread for a 50-cent credit. That's a potential 11.1% return (57.9% annualized*) and the stock would have to fall 7.7% to cause a problem.

Bearish Trade

If you want to take a bearish stance on the stock at this time, consider a June 60/65 bear-call credit spread for a $0.30 credit. That's a potential 6.4% return (33.3% annualized*) and the stock would have to rise 10.2% to cause a problem.

Covered Call Trade

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Originally published on InvestorsObserver.com


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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