Wells Fargo (WFC): Exploring Valuation After Earnings Beat and Fed Asset Cap Removal

Wells Fargo (WFC) stock jumped after the company reported third-quarter earnings and revenues that came in ahead of expectations. The bank’s growth outlook shifted meaningfully after the Federal Reserve lifted its long-standing asset cap.

See our latest analysis for Wells Fargo.

Momentum has clearly shifted for Wells Fargo, with its share price up 22.6% year-to-date and the latest earnings beat fueling renewed optimism after years of regulatory constraints. Recent news, including several senior note offerings, a fresh leadership appointment, and the Fed’s decision to lift the asset cap, has investors focusing on the bank’s growth story. Over the past year, shareholders have enjoyed a robust 35.7% total return, and the three- and five-year total shareholder returns of 105% and 342% respectively show just how much sentiment has improved both short and long term.

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With Wells Fargo surging past key barriers and analyst targets climbing, is the recent upside fully justified by fundamentals, or is there still value to be unlocked as the bank enters its post-cap era?

Most Popular Narrative: 5.9% Undervalued

Relative to the last close price of $86.02, the most widely followed narrative sees Wells Fargo with a fair value of $91.44, suggesting that its recent rally may still have some room to run. The market’s attention now turns to how forward-looking projections stack up against this target.

The removal of the asset cap and resolution of multiple regulatory orders unlocks Wells Fargo's ability to aggressively grow its balance sheet, including deposits, loans, and trading assets, after years of constraint. This could result in higher revenue and earnings growth over the coming quarters and years.

Read the complete narrative.

Want to find out what’s powering this higher fair value? The narrative spotlights rapid revenue growth, strong digital momentum, and a financial reset that could change the profit playbook. Get the inside track and see if these optimistic projections hold up under scrutiny.

Result: Fair Value of $91.44 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, Wells Fargo still faces potential hurdles. These include competitive pressure from digital challengers and regulatory obligations that could slow cost reductions and margin expansion.

Find out about the key risks to this Wells Fargo narrative.

Another View: The Multiples Perspective

While the most followed fair value estimate sees Wells Fargo as undervalued, the market's standard price-to-earnings ratio paints a different picture. Currently, Wells Fargo trades at 13.6 times earnings, which is higher than the US Banks industry average of 11.3 and its peer average of 13.2. However, it remains below its fair ratio of 15.5, which is where the market could drift in the future. This gap signals both risk if expectations falter and opportunity if the company outperforms. Which side of the line will the market ultimately settle on?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Wells Fargo Narrative

If you see the story differently or want to dig into the numbers yourself, you can put together your own narrative in just a few minutes. Do it your way.

A great starting point for your Wells Fargo research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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