Jim Cramer believes Wells Fargo & Company (WFC) is 'still absurdly cheap' despite its 48% stock price increase, trading at less than 14 times earnings compared to the average S&P stock at 23 times earnings. Cramer attributes the undervaluation to the changing regulatory environment under the new administration, which he believes will lead to more mergers and a more favorable business climate for banks. Wells Fargo has been focusing on transformation, making targeted investments, and repurchasing stock, which has decreased its diluted common share count by 7% from the previous year.
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We recently compiled a list of the Jim Cramer Talked About These 11 Stocks Recently.In this article, we are going to take a look at where Wells Fargo & Company (NYSE:WFC) stands against the other stocks Jim Cramer recently talked about.
On Thursday, Jim Cramer, host of Mad Money, discussed the current state of the market following the election, noting that it has been marked by extreme volatility, with some sectors experiencing massive gains while others have faced significant losses. Cramer observed a recurring pattern in the market:
“When it's loved in this market, it's really loved, but when it's hated, I mean just forget about it. That's been the dynamic ever since the election.”
Cramer identified certain industries that have seen notable growth, explaining that these sectors have thrived for specific reasons. However, he cautioned that investors should be wary of jumping in too quickly, as these stocks need time to cool off before they become attractive again. In particular, he mentioned how companies with subscription-based models have been seeing a lot of attention, largely because of their steady revenue streams.
Another sector Cramer highlighted as being in the midst of a strong rally is enterprise software. He explained that companies in this space, particularly those providing essential products to large corporations, have been soaring.
While some sectors are riding high, Cramer also pointed to two areas that are currently undervalued but could see a rebound: pharmaceuticals and semiconductors. He speculated that the pharmaceutical sector has been dragged down in part due to concerns over Robert F. Kennedy Jr.'s controversial appointment as the head of the Department of Health and Human Services. However, Cramer suggested that these concerns may already be priced into the stocks.
Similarly, Cramer noted that semiconductor stocks have struggled. He said that the hatred comes from doubts surrounding the adoption of artificial intelligence-powered PCs. In his closing remarks, Cramer stressed that while there are plenty of stocks that are currently over-loved, many of them genuinely deserve the attention they’re receiving, but not necessarily at their current inflated prices.
As for sectors that seem to be in a perpetual decline, Cramer said he would be interested in buying them, but only after seeing signs that they’ve stopped falling. He added that any potential rebound will depend on greater clarity from President-elect Trump, who he believes could have a significant impact on the market, particularly with his potential to cause turbulence for many stocks.
“We need to see the floor of the abyss, unless, of course, we’re bouncing off it already. And for the overly loved, don't look for Trump for support. He can surprise you with what concerns him. Do not get too cocky. Do not get too smug. It will hurt you for certain.”
Our Methodology
For this article, we compiled a list of 11 stocks that were discussed by Jim Cramer during the episode of Mad Money on November 14 and listed the stocks in the order that Cramer mentioned them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of bankers in suits, discussing the success of the company's banking products.
During the episode of Mad Money, Cramer called Wells Fargo & Company (NYSE:WFC) stock cheap. He said:
“Then there are the banks. We've had a bull market in banks for most of the year, but they really caught fire after Trump won the election. I think this move’s actually justified because bank regulators won't be as tough and unforgiving as the Biden bunch and we'll have many more mergers… With the changing of the guard at these agencies and among the bank examiners, the financials are simply worth more under Trump than they were under Biden, no kidding. Yet, even after this monster move, you know what? Their stocks are still cheap. Wells Fargo stock… it's up 48% but trades at less than 14 times earnings. Average S&P stock sells for 23 times earnings and they're not as good as Wells. Even if you think the S&P is dramatically overvalued, which I know some of you do, Wells Fargo stock is still absurdly cheap.”
Wells Fargo (NYSE:WFC) is a major global financial services institution, offering a broad range of banking, investment, mortgage, and financial products. In the last earnings call, CEO Charles Scharf highlighted the company's transformation, noting that its earnings profile has changed significantly over the past five years. The company has focused on making targeted investments in various areas of its business while de-emphasizing or divesting from others.
In the third quarter of fiscal 2024, the company repurchased $3.5 billion in common stock during the quarter, bringing the total stock repurchases for the first nine months of the year to over $15 billion, a 60% increase compared to the same period last year. As a result of these efforts, the company’s diluted common share count decreased by 7% from the previous year, and by 22% over the past five years, demonstrating its focus on enhancing shareholder value.
Looking ahead, Wells Fargo (NYSE:WFC) management anticipates that net interest income for the fourth quarter of fiscal 2024 will be similar to that of the third quarter. This projection suggests a roughly 9% decline in full-year 2024 net interest income compared to 2023.
Overall WFC ranks 7th on our list of the stocks Jim Cramer recently talked about. While we acknowledge the potential of WFC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WFC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
