Wells Fargo To Resume Share Buyback In 1Q; Shares Rise 3%

Wells Fargo announced on Friday that it will resume its share buybacks and will continue the dividend payments in the first quarter of fiscal 2021. Shares gained 3.4% in after-hours trading.

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Wells Fargo’s (WFC) announcement comes after the Federal Reserve released a stress test report allowing the financial services company to take certain capital actions during Q1 of fiscal 2021, subject to certain restrictions.

The Fed also extended the time for notification regarding the recalculation of Wells Fargo’s stress capital buffer requirement through Mar. 31, 2021.

“Returning capital to shareholders remains a priority for Wells Fargo,” said Wells Fargo CEO Charlie Scharf.

“While we expect to have modest capital distribution capacity in the first quarter, we continue to have significant excess capital above regulatory requirements.” added Scharf.

The company said that it will provide additional information regarding its capital distribution plans during its 4Q earnings call on Jan. 15, 2021.

The stock has lost 46% year-to-date and is trading at a discount of 47% to its 52-week high. (See WFC stock analysis on TipRanks)

Keefe Bruyette analyst Brian Kleinhanzl last week upgraded Wells Fargo to Buy from Hold and raised the price target from $28 to $36. This target implies that investors could be yielding a 24% gain over the coming 12 months.

Kleinhanzl views longer-term prospects as still substantial and believes that the current valuation provides an attractive entry point.

The analyst noted that the investment bank’s rewards outweigh the risks, and added that its ongoing transformation should be positive for both its returns and the share price over the longer-term.

From the rest of the Street, the stock scores a cautiously optimistic consensus of a Moderate Buy based on 7 Buys, and 5 Holds. The average price target of $32.73 implies upside potential of 13% to current levels.