Thinking big-picture is okay. However, when it comes to Wells Fargo's (WFC) recent financial results, the devil is in the details, as the old saying goes. While Wells Fargo shares are heading toward all-time highs, I'm neutral on WFC stock because Wells Fargo's revenue and profit numbers are actually shrinking, not growing, and that's a concern.

Wells Fargo is a banking giant in the USA. Wells Fargo is therefore extremely sensitive to interest rates. That's a mixed blessing since interest rates are now falling, and that means borrowing activity will likely pick up, but Wells Fargo will likely have to lower its interest rates on loans.

Frankly, it's difficult to predict how interest rate changes will ultimately affect Wells Fargo. However, what we can do now is examine Wells Fargo's recently released data points and examine how the market reacted to this data. I suspect that some investors are now being overly optimistic, especially based on the actual facts currently available to the public.

A note on Wells Fargo valuation

If you look at TipRanks' analysis page for Wells Fargo, which I highly recommend, you might notice Wells Fargo's price-to-earnings (P/E) ratio. From this, you can conclude that the company's valuation is quite low and therefore it is a good time to look at WFC stock. However, do not make hasty investment decisions.

First of all, Wells Fargo's GAAP-measured trailing-12-month (TTM) P/E ratio is 12.74x, which is lower than the industry median of 13.48x, but not by much. If we use non-GAAP measures, Wells Fargo's TTM P/E ratio is 11.42x versus the industry median of 12.25x. In other words, Wells Fargo's valuation might be slightly cheaper than the median, but we're not talking about a “scream buy” or a one-time bargain here.

I also invite you to look at the Wells Fargo stock price chart. This suggests that the P/E ratio does not do this. WFC shares rose 5.61% to $60.99 on Friday, followed by a 2% gain at the time of writing. This stock is up more than 50% in the last 12 months. Unless Wells Fargo's recent financial results are consistently spectacular – and we'll soon see that they aren't – it's probably time to take profits, not add to your stock position.

Wells Fargo's balance sheet statistics

The good news about Wells Fargo's third-quarter 2024 earnings stats is that the company reported earnings of $1.42 per share, beating Wall Street's consensus estimate of $1.28 per share. On the other hand, this is still a decline compared to the $1.48 per share that Wells Fargo earned in the year-ago quarter.

That's not a bad result by any means, but it shouldn't justify the recent rise in WFC stock. Additionally, there is another statistic you should pay attention to. Specifically, Wells Fargo reported net income of $5.114 billion in the third quarter of 2024. Again, we see a decline, as Wells Fargo reported net income of $5.767 billion in the same period last year.

Wells Fargo's Falling dollar figures

Outside of these net numbers, there are bearish data points that Wells Fargo investors should take note of. For one thing, Wells Fargo's net interest income (NII), a key measure of the company's lending profits, fell 11% year-over-year to $11.69 billion in the third quarter of 2024.

Additionally, Wells Fargo's total revenue fell to $20.366 billion in the third quarter of 2024 from $20.857 billion in the same quarter last year. Additionally, the company's average loans fell to $910.3 billion in the third quarter of this year from $943.2 billion in the same period last year.

These falling dollar amounts should not trigger panic selling. At the same time, they are unlikely to lead to as much stock buying activity as we saw on Friday and Monday morning.

Is Wells Fargo Stock a Buy According to Analysts?

On TipRanks, WFC is rated a Moderate Buy based on seven Buys and seven Holds assigned by analysts in the last three months. The average price target for Wells Fargo shares is $63.56, implying an upside potential of 1.6%.

See more WFC analyst ratings

If you're wondering which analyst to follow when buying and selling WFC stock, Matt O'Connor of Deutsche Bank (DB) is the most profitable analyst covering the stock (on a time frame of.) with an average of one year) covers a return of 18.18% per assessment and a success rate of 76%.

Conclusion: Should you consider Wells Fargo stock?

The market may have set the bar low for Wells Fargo's third-quarter 2024 earnings per share and initiated a recovery rally when the company exceeded that bar. However, exceeding low expectations doesn't automatically mean Wells Fargo is in great financial shape.

Several bearish data points suggest that Wells Fargo may well be able to improve in some areas. The market appears to have completely ignored these financial facts, so a short-term decline in Wells Fargo's stock price could be imminent. That's why I'm choosing to stay on the sidelines and not make any hasty purchases of WFC stock today.

Disclosure