Susquehanna Getting Bullish On Wells Fargo; Upgrades To Positive

• Shares of Wells Fargo & Co WFC have declined 16.74 percent over the past 6 months, dropping to a low of $48.21 on January 19.
• Susquehanna’s Jack Micenko has upgraded the rating on the company from Neutral to Positive, with a price target of $56.
• Falling the pullback in the shares, Micenko believes that the current stock valuation offers an attractive entry point, especially in view of the company’s quarterly results.

Analyst Jack Micenko mentioned that the stock has historically traded at a premium to peers, “driven by the company's industry-leading returns and loan growth.” The decline in valuation over the past year offers an opportunity “to own a well-run bank at attractive levels.”

Following the last crisis, banking sector stocks have come under considerable pressure, with the combination of higher legal, regulatory and technology costs with lower loan yields weighing on profitability.

“However, given WFC's breadth of business and revenue mix, the company has been able to post above-average returns,” Micenko stated.

Also, Micenko pointed out that the company has one of the lowest cost of deposits in Susquehanna’s coverage universe.

Given Wells Fargo’s focus on growing transactional accounts in recent years, this is expected to be a competitive advantage for the company “in a rising rate environment, particularly as the company needs to add incremental leverage for TLCA compliance.”