WHY WELLS FARGO PRICE IS PRETTY LOW($42)?

Wells Fargo has fell 12% Year to date and currently trading at $42 which is almost 20% which should be $53 as per Trefis’ estimate for Wells Fargo’s valuation.

WHY WELLS FARGO  PRICE ARE LOWER THAN IT SHOULD BE

The third quarter result for 2022 for Wells Fargo has overpassed the expectation with total revenue of $19.5 Billion which is 4% higher which is due to the high interest rate and income  generated from it, however on the other side non-interest revenue has fallen because of  many factors, which includes 74% fall in Mortgage fees, a 27% decrease in the investment advisory & other asset-based fees, and lower investment banking income.  Along with this the credit loss increased from -$1.4 billion to $784 million in the quarter, which resulted in higher non-interest expenses which resulted in the final income of 3.25 Billion which is less compared to previous years.

Wells Fargo Bank branch is seen in New York
Wells Fargo Bank branch is seen in New York

In the first 9 months of 2022, bank’s top line fell by 6% Year over  year to 54.1 Billion. The major  reason  for this fall is the credit losses build up tremendously from -$3.7 Billion to $577 Million and along with this the non-interest expenses increased as well which led to net income of $9.5 Billion which is 36% low compared to previous years.

Bank’s revenues are estimated to be at $74.34 Billion until the  FY2022 ends, bank’s net income margin are expected to be less that what it is now, which will led to an annual EPS of $3.72 and a P/E multiple of just above 14x will lead to a valuation of $53.

 

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