NEW YORK (TheStreet) -- Wells Fargo & Co. (WFC) shares are gaining 0.87% to $49.99 on Monday after Goldman Sachs upgraded the company to "buy" from "neutral" and upped its price target to $60 from $59.
The company can weather storms such as lower oil prices or a slowing Chinese economy, the firm said.
Additionally, Wells Fargo is the "clear winner" with retail and small balance deposit bases projected to see much less pricing pressure as rates rise, according to the firm's note.
"Among banks in our coverage we think Wells Fargo has the clearest path to meet Street '17E EPS, which the market is not currently paying for," analysts said.
In the same note, they downgraded JPMorgan Chase & Co. (JPM) to "neutral" from "buy."
Wells Fargo is slated to post its fourth quarter fiscal 2015 earnings results on Friday before the market opens. Wall Street is expecting the company to earn $1.03 a share on revenue of $21.83 billion.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate WELLS FARGO & CO as a Buy with a ratings score of A-. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, good cash flow from operations, expanding profit margins and increase in net income. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- WFC's revenue growth has slightly outpaced the industry average of 1.3%. Since the same quarter one year prior, revenues slightly increased by 2.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- WELLS FARGO & CO's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WELLS FARGO & CO increased its bottom line by earning $4.10 versus $3.89 in the prior year. This year, the market expects an improvement in earnings ($4.16 versus $4.10).
- Net operating cash flow has increased to $18,937.00 million or 25.72% when compared to the same quarter last year. Despite an increase in cash flow of 25.72%, WELLS FARGO & CO is still growing at a significantly lower rate than the industry average of 288.72%.
- The gross profit margin for WELLS FARGO & CO is currently very high, coming in at 92.60%. Regardless of WFC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 25.35% trails the industry average.
- After a year of stock price fluctuations, the net result is that WFC's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full analysis from the report here: WFC