Wells Fargo & Co (NYSE:WFC, XETRA:NWT)'s recent share price underperformance may have created an attractive entry point for investors, according to Bank of America, which argued that the bank's valuation has fallen more sharply than its underlying fundamentals would suggest.
The firm noted that Wells Fargo shares are down about 15% year-to-date, compared with a roughly 4% gain for its peer group. Shares traded at about $79 on Wednesday afternoon.
Bank of America wrote that the stock's de-rating appears to reflect increasing investor skepticism over management's ability to achieve its long-term profitability targets.
According to the firm, Wells Fargo is currently trading at approximately 10.1 times estimated 2027 earnings and 1.7 times projected 2027 tangible book value, below the roughly 2.2 times tangible book value multiple the bank reached last December, when investors were more fully pricing in management's goal of generating a 17% to 18% return on tangible common equity (ROTCE).
Bank of America maintained that a path to an 18% ROTCE, potentially by 2028, remains achievable through a combination of operational and financial initiatives rather than reliance on a single catalyst.
The analysts outlined several factors that could support higher profitability, including capital optimization, expansion across investment banking, credit cards and wealth management, redeployment of expenses toward revenue-generating activities, balance sheet repricing, and improved branch productivity.
They also argued that Wells Fargo compares favorably with larger regional and money-center peers, noting that banks such as JPMorgan Chase, PNC Financial Services and US Bancorp currently operate at higher profitability levels. Bank of America wrote that it sees no structural reason why Wells Fargo should continue to lag those institutions, citing the bank's scale advantages and manageable capital requirements.
The bank’s analysts further suggested that recent investor concerns surrounding credit quality and potential merger and acquisition activity may be overstated. Bank of America characterized recent credit issues as largely idiosyncratic rather than systemic and wrote that the likelihood of a large, dilutive acquisition remains low.
Looking ahead, the firm indicated that Wells Fargo's second-quarter results could help rebuild investor confidence, assigning the stock a $95 price objective, which it estimated represents roughly 20% upside from current levels.