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Compass Point Research & Trading downgraded Wells Fargo & Company (NYSE:WFC) stock to Neutral from Buy on Tuesday as analyst David Rochester thinks the recent rally has put the stock's risk-reward into better balance.
WFC edged down 1% in Tuesday morning trading.
Shares of the megabank have climbed some 17% so far this year, as investors debate on the potential for the bank's net interest income – the amount of interest banks receive from assets less what they pay on their debts – guidance to be upwardly revised, Rochester pointed out in a note to clients.
Wells Fargo (WFC) already has seen NII decline Y/Y in Q4 2023, with further weakness expected this year. However, investors are debating the potential for NII guidance to be upgraded as market expectations for the number of interest-rate cuts cut have been significantly lowered since the start of 2024.
The lender “has proven to be fairly conservative in its guidance in recent years, almost priding itself on establishing more robust guidance that remain generally stable over time, seemingly more insulated from quarterly changes, reducing the chance in our minds that mgmt. adjusts its NII guidance on the 1Q24 print,” the analyst wrote.
Rochester's Neutral rate disagrees with the SA Quant system rating of Strong Buy and the average sell-side analyst rating of Buy, but aligns with the average SA analyst rating of Hold.
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