Wells Fargo & Co.'s stock is benefiting from rave reviews on Wall Street.
On Thursday, for example, when most banks were down, Wells rose almost 1.6%. At the same time, the American Banker index of the 50 largest banking companies declined 0.59%, and the American Banker 225 fell 0.31%. The California-based banking company's shares rose 75 cents to $47.875.
Merrill Lynch & Co. is among the company's most recent cheerleaders, raising its 12-month price target on Wells to $58, from $53.
Merrill analyst Sandra Flannigan said the bank is "unusually well positioned for consistently superior profit performance."
A strong sales culture, expansive distribution channels, including the Internet, and an "enviable customer base" will enable Wells Fargo to achieve a slightly higher long-term net income growth rate of 10%, assuming long-term interest rates remain around 6.1%, Ms. Flannigan wrote in her report.
The stock has risen more than 17% since its low a month ago. Ms. Flannigan said the only problems she can see is if the banking company botches the integration of its retail systems with that of the old Wells Fargo. Last November, Minneapolis-based Norwest Corp. acquired San Francisco-based Wells, moved its headquarters to California, and assumed the Wells Fargo name. Another factor that could slow Wells' drive would be a large acquisition, she said.
If Wells' share price rises to $58 in the next 12 months, the banking company's price/earnings ratio would rise to 22.3 next year, according to Ms. Flannigan's figures. Cincinnati's Fifth Third Bancorp has the highest p/e ratio in the banking sector, about 24.
"It is hard to find anything wrong with this company," said Diana Yates, a bank analyst at A.G. Edwards & Co.
"They are the only big bank out there that has performed the way they were supposed to," said the analyst, who has a "buy" rating on the company.
Unlike most other banks, Wells has the flexibility to readjust its securities portfolio, because any losses it takes from selling lower-yielding investments and replacing them with higher-yielding ones will be offset by capital gains from its venture capital activities, Ms. Yates said. "Most banks cannot do that."