NEW YORK (Reuters) - Stock in Wells Fargo & Co (WFC.N), the fifth largest U.S. bank, is undervalued and could rise as much as 15 percent over the next 12 months, Barron’s reported in its latest issue.
The business weekly said the bank looks like it will escape the subprime mess and, with Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) raising its position to 9.4 percent, the stock is poised to rebound.
But, it said the bank’s share price, which closed at $29.69 on Friday, is down 22 percent from its 52-week high, trading at a multiple of 10 times 2009 earnings estimates. And yet, it noted, the bank had a return on equity last year of 17.12 percent -- highest of the top five U.S. banks.
“The market has priced this stock down too far. It’s a significant value right now,” Barron’s quoted Bob Millen, chairman of Jensen Investment Management in Portland, Oregon, as saying.
It said other bulls, like Goldman Sachs managing director Lori Appelbaum, say Wells shares have an upside of as much as 15 percent over the next 12 months.
Appelbaum noted the shares are trading at 11 times her 2008 earnings estimate.
Barron’s also cited Morgan Stanley analyst Vivek Juneja as saying Wells Fargo is now in a position to make strategic acquisitions of weakened competitors.
The weekly quoted Chief Executive John Stumpf as saying: “I think we’re going to see opportunities.” But he declined to be more specific.
Wells Fargo Chairman Dick Kovacevich told Barron‘s: “There will be short-term pain, (but) we will come out of this much stronger -- as we always have.”
Editing by Jeffrey Benkoe