Baird has shifted its stance on Wells Fargo, upgrading the bank to Neutral from a previous, lower rating. The brokerage said a broad decline in bank shares since January has brought Wells Fargo's valuation closer to what it considers reasonable and has lessened the potential downside for the stock.
In its assessment, Baird highlighted that the selloff altered the risk-reward profile for Wells Fargo and that a Neutral rating is now more appropriate. The firm said it remains optimistic about the bank's growth prospects once regulatory asset caps are removed, pointing to areas such as loan growth, increased capital markets activity and reduced compliance expenditures as drivers of future profit and operating efficiency gains.
Despite those positives, Baird emphasized that expectations for Wells Fargo's improvement are somewhat elevated. The brokerage noted that a significant portion of the anticipated progress is contingent on the bank adding leverage. Baird observed that the stock currently trades at about 11 times expected 2026 earnings.
To reflect its view of the stock and the operating environment, Baird set a price target of $85 for Wells Fargo. That target is derived from a valuation of roughly 1.8 times next-12-month tangible book value, a multiple Baird described as slightly below historical norms to account for a more challenging operating backdrop.
Separately, Baird upgraded Synchrony Financial to Outperform, saying the recent weakness in consumer finance shares presented an improved entry point. The brokerage cited stable credit trends and robust capital levels as supportive of ongoing shareholder returns for Synchrony.
Baird also commented on drivers behind the selloff in consumer finance names, pointing to investor concerns about potential disruption from artificial intelligence and a proposed 10% credit card rate cap put forward by Donald Trump. The firm said such a cap appears unlikely without major changes to lending markets and characterized the recent decline in Synchrony shares as an opportunity to buy.
What Baird sees
- Reduced downside risk in Wells Fargo following a sector-wide pullback.
- Growth potential post-cap lifting from stronger loan demand, capital markets activity and lower compliance costs.
- Valuation anchored at about 11x expected 2026 earnings with a price target of $85 based on 1.8x next-12-month tangible book value.
Context on Synchrony
Baird's upgrade of Synchrony reflects what it deems an attractive entry after recent weakness in consumer finance stocks, supported by steady credit metrics and solid capital, according to the brokerage.