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WFC

Wells Fargo reports Q4 numbers January 13

What's Happening

Wells Fargo ( WFC ) will report fourth-quarter numbers before the market opens on January 13. Analysts expect to see the bank report earnings of $1.01 per share, down from $1.03 during the same period last year. The stock is up a modest 1.0% over the last year.

Technical Analysis

WFC was recently trading at $54.89, down $3.13 from its 12-month high and $11.34 above its 12-month low. Overall technical indicators for WFC are bullish, and the stock is in a strong upward trend. The stock has recent support above $54.50, and has recent resistance below $58.00. Of the 26 analysts who cover the stock, nine rate it a "strong buy", two rate it a "buy", 11 rate it a "hold", and four rate it a "strong sell". The stock receives S&P Capital IQ's 4 STARS "Buy" ranking.

Analyst's Thoughts

During the latter part of 2016, Wells Fargo dealt with a scandal regarding the company's employees opening fake accounts. The scandal hurt the stock in September, but as is usually the case, Wall Street displayed a short memory on the scandal, and the stock rose sharply following the presidential election and the recent interest rate increase by the Federal Reserve. The thinking is that Trump's economic policies will benefit the financial sector, and that rising interest rates will lead to higher interest rate income for all the major banks. As such, we have seen WFC trade sharply higher over the last couple of months, and shares are now in the upper end of its 52-week range. While the stock is up just 1.0% over the last 12 months, it is up 23.9% since the end of September, so sentiment is definitely bullish at this time. The stock is currently trading with a P/E of just 13.6, which suggests that there is still plenty of upside as long as the company is able to post earnings that are in-line or better than expected. Earnings are forecast to rise just 3.0% in 2017, but if we see one or more interest rate increases during the year, that figure will move higher and should justify the recent bullishness in the stock, and drive shares higher.

Stock Only Trade

Bullish Trade

If you want a bullish hedged trade on the stock, consider a February 45/50 bull-put credit spread for a 30-cent credit. That's a potential 6.4% return (55.5% annualized*) and the stock would have to fall 8.4% to cause a problem.

Bearish Trade

If you want to take a bearish stance on the stock at this time, consider a February 60/65 bear-call credit spread for a $0.25 credit. That's a potential 5.3% return (45.7% annualized*) and the stock would have to rise 9.8% 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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