This Banking Giant Just Got a $90 Price Target Upgrade

When it comes to the financial sector, understanding the underlying impact of bank balance sheets and key performance indicators (KPIs) can be a daunting task. However, one common indicator is always subject to directly affecting the way a bank makes money on the bottom line, and that is the capital requirement set by government regulators.

Investors need to understand that the more capital a bank must have on hand to comply with regulations, the more stringent the rules are regarding the amount of lending products, such as mortgages and credit cards, that the underlying bank can undertake. The opposite is true when these capital requirements are reduced; the bank can conduct more business with significantly less capital on hand, essentially a significant leveraging factor for shareholders to enjoy.

One bank in the industry has just gained momentum, driven by the potential for upside expansion in earnings per share (EPS). That bank is Wells Fargo & Co. (NYSE: WFC). After a government agency lifted the bank’s capital requirement, which had been capped at $1.95 trillion, Wells Fargo now has a relatively open field ahead of itself to keep churning out products that bring in interest income.

Why Wells Fargo’s 17% EPS Growth Has Wall Street Bullish

Perhaps some market agents knew about Wells Fargo's upcoming news, as they had already been bidding for its shares in recent weeks. Looking at Wells Fargo in terms of price action, investors can see that the stock rose by 3.6% over the past month, which is always exciting for a “boring” banking stock like this one.

What’s more interesting is that Wells Fargo now trades at up to 92% of its 52-week high level, signaling an official bull market and leading some of its other peers in the industry. That being said, investors now need to determine their current position and, in particular, where their risk-to-reward ratio stands in terms of potential upside and downside.

Looking internally, Wells Fargo management had announced a stock buyback program worth up to $40 billion, indicating that insiders themselves thought the stock was cheap enough to start buying some for themselves as early as late April 2025. Now, the reasoning behind this massive buying is becoming a bit clearer for everyone else.

Now that the news is starting to hit the market, investors can also note where Wall Street analysts expect Wells Fargo’s EPS to go in the near future. As for the fourth quarter of 2025, analysts expect the bank to report EPS of up to $1.62, a significant jump from today’s $1.39 level, representing a nearly 17% increase.

As most investors know, where EPS growth goes, so does the stock price. This fundamentally driven growth forecast is sure to help Wells Fargo Deliver on upside potential, but just how much upside could there be in the bank’s stock?

Analysts Say WFC Could Rally 18% as Tailwinds Build

Building on this theme, Bank of America analyst Erika Najarian reiterated her Buy rating for Wells Fargo stock as of early June 2025. Not only does this analyst see the stock as a Buy, but she also placed a valuation target of up to $90 per share on it.

Compared to where it trades today, this target would imply that Wells Fargo could rally by as much as 18% to closely match the expected EPS growth of these other analysts. With this in mind, investors can now look for further evidence to back up the belief that Wells Fargo can fulfill this upside expectation.

One way to gauge this sentiment is to examine how the market values Wells Fargo stock compared to its peers in the commercial banking sector. By trading at a forward P/E multiple of 11.5x today, Wells Fargo commands a premium over names like Bank of America Inc. (NYSE: BAC) and Citigroup Inc. (NYSE: C), which trade at a respective 9.0x and 8.5x each.

The market's willingness to overpay for Wells Fargo’s future earnings should indicate confidence in its future upside potential, considering that there is now double-digit growth potential following the regulatory stance's shift in favor of Wells Fargo’s business.

More than that, investors could argue that today’s consumer and credit cycle could be near a bottoming, delivering on the upside tailwinds that can be had when and if mortgage volumes and credit card issuance come back to their former high levels.

That would significantly boost Wells Fargo’s EPS beyond forecasts, especially since it has the green light to conduct more business than is currently projected. While this may take some time, the tailwinds are definitely present for the bank to continue delivering higher prices.

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