UPDATE: Compass Point Raises Price Target On Wells Fargo As Most-Favored Nation Status Indicates Stock Is Fairly Valued

In a report published Thursday, Compass Point analyst Kevin Barker reiterated a Neutral rating on Wells Fargo & Co (NYSE: WFC), and raised the price target from $47.00 to $48.00.

In the report, Compass Point noted, “We maintain our Neutral rating and increase our target to $48 from $47 following the release of 4Q14 earnings. Our higher price target is a reflection of a decline in our ‘normalized' provision level to 50 bps from 60 bps as part of our valuation methodology. Although we believe WFC ultimately will see provisions at the higher level (charge-off run rate prior to the financial crisis averaged 79 bps) as the company takes on more risk and recoveries burnout, it will likely will be several years before we get back to these levels. Despite another operating miss and recent multiple expansion, WFC outperformed the peer group in a tough tape as it continues to receive ‘most favored nation' status from the market. While we believe WFC is one of the better positioned banks given its strong deposit base and diversified revenue streams, the stock screens as being fairly valued while trading at 12.3x FY15E EPS or 2.0x TBV. We are adjusting our FY15E EPS to $4.14 from $4.23 and FY16E EPS to $4.42 from $4.49 primarily due to higher operating expenses and credit provisions.”

Wells Fargo closed on Wednesday at $51.25.