Too Big To Profit?
Dear Rundown Reader,
Earnings season is back, and in full swing this week.
Investors are hoping this year’s first round of reports will bring stability to an extremely volatile market.
What a strange concept right?
Market action determined by real data, not political narrative… It’s been a while since we’ve seen that!
First up are the big name banks. Citigroup, Bank of America, and Wells Fargo among others.
Yes, good Ol’ Wells Fargo.
Investor sentiment is strong, but we’re not sure why.
All we see are smoke and mirrors.
Today’s Rundown examines the bullish case for Wells Fargo.
Your Rundown for Tuesday, April 10, 2018…
It’s All Smoke and Mirrors
Wells Fargo (NYSE: WFC) will post its Q1 earnings report this Friday.
Expert sentiment so far is positive ahead of reporting.
Wall Street forecasts WFC for earnings of $1.07 per share and predicts $21.71 billion in revenue.
This is much better than last year’s Q1 earnings of $1.00 and estimated $22.0 billion in revenue.
According to Nasdaq data, the new consensus price target is $63.05 with a 52 week range of $49.27 to $66.31.
As of today WFC shares are trading a shade over $52, indicating most experts firmly believe that WFC is poised for a run.
Speaking in a CNBC report, UBS analyst Saul Martinez notes: “Wells Fargo’s substantial underperformance has created a buying opportunity.”
The stock is up almost 2% over the past five days.
Bullish sentiment is strong. But is it justified?
We at The Rundown are more skeptical.
Yes, bank stocks are doing well up 19% compared to the broader market up 15%.
But not every name in the lot is a true winner. Wells Fargo specifically.
Deeper analysis paints a different picture.
WFC recently traded down over $13 from its 12-month high to only $3.23 above its 12-month low, indicating a significant downward trend for the stock.
It’s essentially all smoke and mirrors when it comes to WFC, which is clearly benefiting from a “rising tide lifts all boats” situation in the banking sector.
In reality WFC doesn’t have much good going for it right now. They’re still facing major legal and regulatory battles.
Reuters recently reported that WFC will be subject to a new round of fines as high as $1 billion for auto insurance and mortgage lending abuses.
That’s going to hurt.
Trump also has a beef with WFC.
In December he tweeted: “Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased.”
That’s going to hurt too.
Bottom line is WFC has problems. Big problems. Problems that typically don’t bode well for investors.
There could be some dark days ahead WFC.
No matter how bullish Wall Street’s sentiment gets this week.
Now, turning to the markets this morning…
Market Rundown for Tues. April 10,
S&P 500 futures are up 28.75 at 2,647.75.
Oil rises 2% to $64.75.
Gold remains flat this morning at $1,340.
Bitcoin remains under $7,000 at $6,740 this morning.
We’ll talk again on Wednesday.
For the Rundown,