Citigroup and Wells Fargo have both benefited from the decision of UBS to upgrade its price target, as after UBS announced its decision to increase the price target for Citigroup, its shares increased. However, on the contrary, UBS decided to decrease the price target for Wells Fargo, which again had a positive impact on its shares. UBS has decided to decrease the target from $63 to $60 per share.
After the decision of UBS, the shares of both banks increase by 1 percent. In a note to its clients, Saul Martinez said that Wells Fargo has been performing substantively low or lets say, its substantial underperformance has led to a good buying opportunity.
Once UBS made its decision and announced it, shares of both banks increased on Thursday. Citigroup experienced a 1.1 percent rise, whereas Wells Fargo’s shares increased by 0.9 percent.
After UBS changed its decision to change the rating of Wells Fargo- from neutral to buy but then it lowered its price target of the bank from $63 to $60. The new and latest price target is now 12 percent higher than Thursday’s price of $53.50.
During the last year, shares of Wells Fargo dropped and took a massive hit after the bank revealed it’s cross-selling program. The employees of the bank were pushed to sell of a lot of products, in fact, as many as possible, and then went on to open accounts in the names of the customers without even their permission to hit the sale targets. As a result, the bank reached a huge settlement of $190 million with the United States authorities back in 2016. However, after all of this aftermath, John Stumpf, CEO of the bank, was forced to submit his resignation.
While UBS knows that things are not that smooth for Wells Fargo, the UBS analyst said that there are a lot of challenges that are going to hit the reputation of the bank. But on the other hand, while there are hurdles, there might be some positivity and positive ground for the company. Moreover, the UBS analyst also said that the company’s shares are trading at huge PE discounts as compared to the big caps of other regional banks.
Saul Martinez, while speaking to its clients through a letter issued by the bank, said that Wells Fargo’s consistent underperformance has caused a good buying opportunity. He also said that Fargo’s shares have generally lagged than the average bank in their coverage universe by as much as 49 percentage points.
On the other hand, UBS also decided to upgrade Citigroup’s status from buy to neutral but at the same time, it also increased the price target from $78 to $80. UBS’s decision to change the price targets and status’s of both banks led to an immediate increase in the share price of both banks, as the shares and stocks of both banks increased immediately after UBS announced its decision.