Is Wells Fargo (WFC) A Bargain After Preferred Share Weakness Raised Rate Fears?

Why preferred share weakness is driving the Wells Fargo story

Recent weakness in Wells Fargo (WFC) preferred shares, alongside other major banks, points to investors expecting interest rates to stay elevated, putting funding costs and overall sentiment under closer scrutiny.

Short term, Wells Fargo’s share price has cooled, with the 1 day share price return down 2.23% even as the 90 day share price return is up 7.31%. At the same time, the 1 year total shareholder return of 11.29% and very large 3 year total shareholder return near 7x suggest longer term momentum has been strong. The recent dip comes as investors weigh higher rate expectations and preferred share weakness against upcoming earnings commentary and the planned CFO appearance at the Barclays Global Financial Services Conference on 15 September 2026. These factors could influence how you think about both risk and resilience around the current US$87.96 share price.

Spot patterns across Wells Fargo peers by scanning for banks with resilient earnings, funding strength, and rate sensitivity using the curated 82 resilient stocks with low risk scores.

After a sharp multi year run and a 2.23% pullback to US$87.96, Wells Fargo now trades at a clear discount to both analyst targets and intrinsic estimates. How wide does that gap appear to be on fair value grounds?

Price-to-earnings of 12.3x: Is it justified?

On the numbers provided, Wells Fargo screens as undervalued against its own earnings power, with a P/E of 12.3x and the shares trading at $87.96 compared with both a $121.68 SWS DCF fair value estimate and a 14.5x fair P/E ratio level.

The P/E ratio compares what you pay for each dollar of current earnings. For a large US bank like Wells Fargo, this measure speaks directly to how the market is weighing its profit stream against peers and against what models suggest might be a reasonable level over time. A 12.3x multiple, when set against a fair ratio of 14.5x, indicates that investors are pricing earnings at a discount to where SWS regression work suggests they could sit, even as the share price already reflects a mix of slower forecast revenue growth and only moderate expected profit expansion.

Against the broader US Banks industry, the picture is more nuanced. Wells Fargo is described as good value versus a peer average P/E of 13.3x, yet is also labelled expensive relative to the wider US Banks industry average of 11.9x. That split indicates the market is assigning a small premium to Wells Fargo compared with the industry as a whole, while still keeping the stock below both the peer group level and the 14.5x fair ratio reference point that SWS uses as a guide to where the multiple could move if sentiment on its earnings profile improved.

Explore the SWS fair ratio for Wells Fargo.

Result: Price-to-earnings of 12.3x (UNDERVALUED)

Still, the story can break if funding costs rise faster than Wells Fargo’s lending income, or if credit losses pick up and put pressure on that earnings base.

Find out about the key risks to this Wells Fargo narrative.

Another view on Wells Fargo’s value

The SWS DCF model suggests Wells Fargo is worth about $121.68 per share, compared with the current $87.96 price. That points to the stock trading at roughly a 28% discount, which reinforces the P/E signal but also raises a question: How comfortable are you relying on long term cash flow assumptions when preferred markets are this jumpy?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Wells Fargo for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 49 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Balancing both the risks and the rewards associated with Wells Fargo at this time can be challenging. Use the full dataset, move quickly, and let the numbers shape your own view via the 2 key rewards and 1 important warning sign.

Looking for more Wells Fargo sized investment ideas?

If you stop with Wells Fargo, you risk missing other opportunities that fit your style. Put a few more ideas on your radar before the next move.

• Target steadier compounding by scanning companies with strong income potential through the 6 dividend fortresses.
• Hunt for mispriced opportunities by reviewing the 17 high quality undiscovered gems that pair quality fundamentals with less crowded attention.
• Prioritise resilience first and sift through the list of solid balance sheet and fundamentals (24 results) to see which businesses keep their finances tight even when conditions get tougher.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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