Wells Fargo Stock Price Analysis 2025: Recovery After Earnings Misses, Current Value & Outlook

Wells Fargo & Company (WFC), the third-largest U.S. bank deemed too big to fail, has faced earnings per share (EPS) shortfalls for four consecutive quarters. Despite this, the stock showed signs of recovery after hitting a low of $22.00 on May 13, 2024, although weekly technical indicators remain bearish.

Year-to-date, Wells Fargo's stock has declined by 54.3%, placing it firmly in bear market territory at 55.1% below its 52-week peak of $54.75 recorded on November 29, 2023. Since the May low, the share price has rebounded by 11.7%, signaling potential buying opportunities.

With a price-to-earnings (P/E) ratio of 20.79 and an attractive dividend yield of 8.18%, Wells Fargo remains a significant player among the four major money center banks. The bank's financial health is influenced by broader economic factors, including real estate lending trends and loan portfolio composition.

According to the Federal Deposit Insurance Corporation (FDIC) Quarterly Banking Profile for Q1 2024, the Deposit Insurance Fund holds $110.3 billion in assets safeguarding $8.17 trillion in insured deposits. Real estate loans totaled $4.19 trillion but remain 0.7% below 2007 levels, indicating ongoing challenges in this sector.

Notably, home equity loans have steadily declined by 43.7% since 2007, despite rising home prices. Construction and development loans, while increasing recently, are still 42.5% lower than 2007 figures. Conversely, nonfarm nonresidential loans have surged 56.3% since 2007, raising concerns about potential risk exposure in this category.

Technical analysis reveals that Wells Fargo's daily chart formed a 'death cross' on March 4, 2024, when the 50-day moving average dipped below the 200-day moving average, signaling a bearish trend that led to the May 13 low. Currently, the stock trades between a monthly value level of $22.03 and a quarterly risk threshold of $28.65, with 50-day and 200-day moving averages at $26.39 and $39.57, respectively.

The weekly chart remains negative, with shares below the five-week modified moving average of $26.36 and the 200-week simple moving average at $49.96, indicating a continued mean reversion trend. The 12x3x3 weekly slow stochastic oscillator is projected to decline to 31.64 this week, down from 32.87 on July 17, 2024. This momentum indicator had previously signaled oversold conditions in late May, suggesting the stock was undervalued at that time.

Investment Strategy: Investors are advised to consider buying Wells Fargo shares on dips to the monthly value level around $22.03 and to trim positions when the price approaches the quarterly risk level near $28.65. This disciplined approach leverages historical volatility and technical levels to optimize entry and exit points.

The proprietary analytics used to determine these levels incorporate nine years of monthly, quarterly, and mid-year closing prices, providing a robust framework for anticipating price movements. Pivot points, identified when value or risk levels are breached within their respective timeframes, often act as magnets, increasing the likelihood of retesting.

The 12x3x3 weekly slow stochastic indicator, refined through over three decades of backtesting since the 1987 market crash, effectively filters false signals by analyzing 12-week highs, lows, and closes. Readings above 80 indicate overbought conditions, while those below 20 suggest oversold levels. Extreme values, such as above 90 or below 10, correspond to parabolic bubbles or undervaluation phases, respectively, often preceding significant price corrections or rallies.

Disclosure: The author holds no positions in Wells Fargo stock and does not intend to initiate any within the next 72 hours.

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