Is Wells Fargo Stock a Buy, Sell or Hold After Its Earnings Miss?

NYSE: WFC | Wells Fargo & Company  News, Ratings, and Charts

WFC – Despite missing second-quarter earnings estimates, Wells Fargo’s (WFC) shares surged 6.2% in early trading last week. So, let’s evaluate if it is worth buying the stock now. Read on…

Wells Fargo & Corporation (WFC) is a leading financial services company with about $1.9 trillion in assets, serving one in every three U.S. families and more than 10% of small companies in the United States, and is a leading middle market banking provider in the United States. The company’s shares have gained 11% over the past month.

However, WFC’s earnings and revenue fell far short of Wall Street expectations. WFC reported earnings per share of 74 cents, a 46% decline year over year. Its revenue came in at $17.03 billion, down from $20.27 billion in 2021. Analysts expected WFC to earn 83 cents per share on $17.5 billion in sales.

CEO Charlie Scharf said, “While our net income declined in the second quarter, our underlying results reflected our improving earnings capacity with expenses declining and rising interest rates driving strong net interest income growth.” He further added high-interest rates and weaker financial markets caused VC, mortgage banking, and investment banking revenue to decline.

Also, the stock is down 9.8% year-to-date and 19.4% over the past six months to close its last trading session at $43.28.

Here’s what could shape WFC’s performance in the near term:

Mixed Financials

WFC’s net interest income increased 15.9% year-over-year to $10.19 billion for the first quarter ended June 30, 2022. However, its total revenue decreased 15.9% from the year-ago value to $17.03 billion. The company’s net income declined 48.4% from the prior-year quarter to $3.11 billion, while its EPS decreased 46.4% year-over-year to $0.74.

Negative Profit Margins

WFC’s trailing-12-month net income margin of 23% is 20.3% lower than the industry average of 28.9%. Also, its trailing-12-month ROA and ROE are negative 0.94% and 10%, respectively.

Mixed Valuation

In terms of forward non-GAAP P/E, the stock is currently trading at 10.73x, 7.4% higher than the industry average of 9.99x. However, its forward Price/Sales of 2.22x is 22.2% lower than the industry average of 2.85x. Also, WFC’s forward Price/Book of 0.98x is 12.9% lower than the industry average of 1.13x.

Consensus Rating and Price Target Indicate Potential Upside

Each of the 13 Wall Street analysts that rated WFC, ten rated it Buy, and three rated it Hold. The 12-month median price target of $52.38 indicates a 21.03% potential upside. The price targets range from a low of $45.00 to a high of $62.00.

POWR Ratings Reflect Stable Prospects

WFC has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. WFC has a C grade for Quality and Value. The company’s mixed profitability is consistent with the Quality grade. In addition, its mixed valuations are in sync with the Value grade.

In the 11-stock, F-rated Money Center Banks industry, WFC is ranked #8.

Beyond what I’ve stated above, you can view WFC ratings for Growth, Stability, Sentiment, and Momentum here.

Bottom Line

As the U.S. economy recovers, the company expects significant improvement in all its business segments. However, WFC’s weak financial results in the last quarter and negative profit margins have raised investors’ concerns over its prospects.

Furthermore, analysts expect its revenue and EPS to decline 6.7% and 16.8% year-over-year to $73.21 billion and $4.01 in the current year. So, we think investors should wait before scooping up its shares.

Want More Great Investing Ideas?

3 Stocks to DOUBLE This Year


WFC shares fell $0.15 (-0.35%) in premarket trading Friday. Year-to-date, WFC has declined -8.90%, versus a -15.41% rise in the benchmark S&P 500 index during the same period.


About the Author: Pragya Pandey


Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
WFCGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Does Trump Change Stock Market Outlook?

The rally of the S&P 500 (SPY) after the election gives a sense that investors are happy that Trump was elected. But perhaps there is more to this story than meets the eye. That’s why Steve Reitmeister shares his updated market outlook taking into account the pros and cons of Trumps proposed new policies. This comes with a preview of his top 11 stocks to buy now.

3 Streaming Stocks Benefiting from Cord-Cutting Trends

As streaming continues to dominate the digital entertainment landscape, the global streaming market presents a lucrative investment opportunity. So, it could be ideal to invest in fundamentally solid streaming stocks Netflix (NFLX), Walt Disney (DIS), and Roku (ROKU). Read further...

3 Gold Stocks to Buy as Safe-Haven Demand Grows

Gold is a stable investment now due to its role as a safe-haven asset during economic uncertainty, rising demand, industrial use, and growth, bolstered by central bank purchases and interest rate cuts. Therefore, investors should consider investing in top gold stocks such as Newmont (NEM), Barrick Gold (GOLD), and Agnico Eagle Mines (AEM). Read more...

3 AI Stocks Transforming Industries and Driving Future Growth

With rapid digitalization, rapid adoption, and development, as well as surging demand, the AI market is on the rise. Amid this backdrop, investors could buy fundamentally solid AI stocks NVIDIA Corporation (NVDA), Microsoft (MSFT), and Meta Platforms (META) poised for substantial gains. Continue reading...

Updated Stock Market Expectations

The S&P 500 (SPY) has already reached an impressive goal of hitting 6,000. Yet you can see how much shares are struggling now up against this resistance. Steve Reitmeister shares his views on what comes next for the market and his top 10 stocks to stay on the right side of the action.

Read More Stories

More Wells Fargo & Company (WFC) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All WFC News