Investors who have owned stocks in 2021 have generally experienced some big gains. In fact, the SPDR S&P 500 ETF Trust (NYSE: SPY) total return over the last 12 months is 23.9%. But there is no question some big-name stocks performed better than others along the way.
Wells Fargo’s Big Run: One company that was a strong investment last year was U.S. megabank Wells Fargo & Co (NYSE: WFC).
Wells Fargo was one of several big banks that outperformed in 2021 in an environment of falling interest rates, elevated financial market trading activity and impressive loan growth.
Wells Fargo consistently beat analyst earnings expectations throughout 2021 as it continued to work past a series of scandals that weighed on the stock over the past decade.
In the most recent quarter, Wells Fargo released $1.65 billion in reserves and paid a $250 million fine for “unsafe or unsound practices” related to its loan modification program. The company also paid a $71.6 million settlement as part of a government fraud lawsuit accusing the bank of overcharging businesses for foreign exchange transactions from 2010 to 2017.
Net interest income dropped 5% in the third quarter, but Wells Fargo supported EPS by buying back $5.3 billion in stock in the quarter.
Wells Fargo’s net interest margins could get a boost from rising interest rates in 2022. The stock also has a potentially huge bullish catalyst looming at some point if the Federal Reserve lifts the punitive asset cap that has been in place since 2018.
At the beginning of 2020, Wells Fargo shares were trading at $63.85, and by the start of March the stock was down around $41 on news of the coronavirus spreading in China. Then later that month, when the market crashed during the U.S. COVID-19 outbreak, Wells Fargo shares dropped as low as $25.10.
When the market bounced off pandemic lows, Wells Fargo began to rebound as well. The stock recovered to as high as $33.91 in April 2020 before its recovery rally stalled. Wells Fargo shares traded all the way back down to $22 in May, and didn’t make their 2020 lows until they reached $20.76 in late October.
Wells Fargo In 2022, Beyond: Wells Fargo finished 2020 back above $30 and finally got back to the $50 mark in August 2021. The stock rallied to a new 52-week high of $56.06 in January 2022. Today, Wells Fargo shares are trading at $54.97.
Wells Fargo investors who bought one year ago and held on with hopes for a big 2021 performance have generated a nice return on their investment at this point. In fact, $1,000 in Wells Fargo stock bought on Jan. 10, 2021, would be worth about $1,672 today, assuming reinvested dividends.
Looking Ahead: Analysts are expecting Wells Fargo to take a breather in the next 12 months. The average price target among the 24 analysts covering the stock is $57, suggesting just 3.7% upside from current levels.
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