Sanford Bernstein: You Are All Wrong About Wells Fargo

Shares in Wells Fargo climbed into slightly positive territory this morning after an analyst at Sanford Bernstein upgraded shares of the San Francisco bank from Market Perform to Outperform. He also raising his price target from $31 to $40.

The firm’s new price target represents potential price appreciation of more than 41% from current levels, Street Insider reports.

The move comes after Wells Fargo has been plagued by rumours, media scrutiny and negative commentary from banking sector analyst Dick Bove. We’ve reported on potential liabilities from Wachovia’s commercial loan portfolio. The bank has declined to offer any clarification on its exposure. Wachovia has reputation for bristling at inquiries from analysts and journalists.

You should be cautious about analyst predictions of stocks going higher. It may not mean the analyst believes the company doesn’t face serious balance sheet challenges. In fact, analysts may believe a stock is going higher because the market is ignoring fundamentals or a company will enjoy government support. Some price targets are pure momentum calls.

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