Analyst bullish on Wells Fargo

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Wells Fargo has picked up a ringing recommendation from Jefferies.

"Wells is one of the strongest, most respected U.S. banks, which has led it to be a core portfolio holding for investors," writes analyst Ken Usdin, who has just initiated coverage.

"The company enjoys a benevolent combination of offensive (dividend growth/buybacks, market share gains, portfolio acquisitions) and defensive (less exposure to headline/revenue risks vs. bigger bank peers, cost control program) characteristics. While investors have recently flocked to quality names like Wells, we still see directional upside in addition to relative downside support."

It makes sense of course to look at Wells Fargo in the context of other massive consumer banks like JPMorgan Chase, Citigroup and Bank of America. TheStreet.com notes that Wells Fargo trades just above tangible book value, while its peer banks are still mired well below that level. In addition, Wells Fargo trades at nine times the consensus 2013 earnings estimate of $3.66 a share, among analysts polled by Thomson Reuters. Again, that multiple is higher that its peers, "reflecting Wells Fargo's stronger and more consistent earnings performance."

Second-quarter earnings will be interesting to watch. Wells Fargo remains less encumbered by trading and investment banking activity compared with the others. It's a purer play on consumer banking. As the new leader in consumer mortgagers, it may be best positioned to benefit from strong mortgage refinancing activity in the second quarter. It reports later this week.

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