Wells Fargo Stock Surges 58% in a Year: Time to Buy Now or Wait?

Core Viewpoint - Wells Fargo & Company (WFC) has shown strong stock performance, rising 58% over the past year, slightly below the industry's 58.5% increase, outperforming peers like JPMorgan and Bank of America [1][3]. Performance Analysis - WFC's stock is trading above its 50-day moving average, indicating strong upward momentum and price stability [3]. - The company has made significant progress in resolving compliance issues, which is expected to positively impact its growth potential [4][11]. Compliance and Regulatory Developments - Under CEO Charlie Scharf, WFC is enhancing its compliance framework, receiving regulatory approval for improved risk management techniques [4][6]. - The Office of the Comptroller of the Currency terminated a 2018 consent order related to WFC's compliance risk management program, which is a significant milestone [7]. - The Federal Reserve has also terminated two longstanding consent orders from 2011, indicating progress in regulatory compliance [8]. Asset Cap and Growth Potential - WFC is nearing the removal of a $1.95 trillion asset cap imposed in 2018, which has limited its growth potential [9]. - Lifting the asset cap is crucial for WFC to enhance its loan growth, a key component of its asset portfolio [10]. Financial Performance and Outlook - WFC's net interest income (NII) declined 8$47.7 billion in 2024, with a net interest margin (NIM) dropping to 2.73% from 3.06% in 2023 [12][13]. - Management anticipates a 1-3% growth in NII for 2025 [13]. Branch Network and Expense Management - WFC is optimizing its branch network, reducing the number of branches by 3% year-over-year to 4,177 in 2024, while investing in branch staff and technology [15][16]. - The company has implemented cost-cutting measures, resulting in a 3.5% reduction in headcount by the end of 2024, with expectations of $2.4 billion in gross expense reductions in 2025 [17]. Investment Consideration - The combination of resolving compliance issues, potential asset cap removal, and Fed rate cuts is expected to support WFC's top-line growth and financial performance [20]. - Earnings estimates for 2025 and 2026 have been revised upward, indicating positive growth expectations [21]. - WFC is currently trading at a forward 12-month P/E of 13.41X, below the industry average of 14.59X, suggesting it is undervalued compared to peers [26][29].