Posted on November 29th, 2021
Wells Fargo & Co. (WFC) has rebounded slowly from the 2020 coronavirus sell-off but was still added to the WhaleWisdom Whale Index 100 on November 17, 2021. While Wells Fargo saw its stock decline by approximately 10.0% over the past 2-years, resulting in the financial services company underperforming the S&P 500’s gain of about 46.3%.
Wells Fargo is a diversified financial services company with segments in community and wholesale banking in addition to wealth and investment management. The company provides various banking, insurance, mortgage, financial, and investment services. While the Financial Services Sector has had to adapt to changing customer needs during the coronavirus pandemic, it faired overall well. However, Wells Fargo is also still dealing with the fallout of a mortgage fraud scandal that became widely publicized in 2016. Beyond fines and penalties, the company continues to navigate regulatory restrictions and improve compliance to restore regulatory and consumer confidence.
Hedge Funds and Institutions Are Selling
Hedge funds and institutions were cautious in the third quarter, with both actively selling Wells Fargo’s stock. Hedge funds decreased their aggregate 13F shares held to approximately 522.4 million from about 547.8 million. Of hedge funds, 33 created new positions, 144 added to an existing holding, 43 exited, and 138 reduced their stakes. Institutions decreased their aggregate holdings to about 2.85 billion from 2.91 billion. Also, the 13F metrics between 2001 and 2021 suggest that while the company may have its occasional setback, it still maintains forward momentum and, therefore, long-term investment potential.
Growth Estimates Vary
Analysts predict challenges in 2022, with both revenue and earnings losing ground but later rebounding in 2023. Year-over-year revenue growth is expected to be $76.0 billion in 2021, $72.2 billion in 2022, and $74.9 billion in 2023. Growth could bring earnings per share to $4.27 by 2021, slipping to $3.69 by 2022 and rising to $4.23 by December 2023.
The financial sector continues to see gains and, more recently, was positively impacted by the nomination of the Federal Reserve Chairman Jerome Powell for a second term. Even with investor confidence strengthened by Powell’s continuation as Chairman, it is understandable that some analysts would take conservative stances on the stock. Scott Siefers of Piper Sandler & Co. kept a Neutral rating on the shares while raising the firm’s price target on Wells Fargo to $48 from $45. Siefers appeared encouraged by the company’s third-quarter performance, as earnings came in above estimates.
Wells Fargo has seen its share of challenges over the past few years yet has shown promising growth in 2021. Despite facing ongoing regulatory scrutiny and restrictions, the company made its way to the WhaleWisdom Whale Index and followed a slow upward trajectory that may be appealing to patient investors.