Investing.com -- Raymond James downgraded Wells Fargo to Market perform, saying the stock’s recent rally has priced in much of the upside from improving profitability, while upgrading U.S. Bancorp (BVMF: USBC34 ) to Strong buy on expectations for a turnaround in operating leverage and sentiment.
Wells Fargo shares have risen more than 15% since the brokerage raised earnings estimates in March, following the Fed’s decision to lift the bank’s long-standing asset cap.
But with the stock closing just shy of Raymond James’ $84 target last week and now trading at a premium to most peers, analysts said further near-term gains appear limited.
Upside to its EPS estimates is now appropriately reflected in its premium valuation, analysts wrote, citing Wells’ current multiple of 12.4 times 2026 earnings, above the peer group average of 11 and trailing only JPMorgan.
Despite the downgrade, the firm said it remains constructive on Wells Fargo’s long-term fundamentals, including revenue growth opportunities and cost improvements.
But it expects investor attention to rotate toward cheaper regional banks as megacap lenders like JPMorgan, Bank of America and Citi trade near 52-week highs.
U.S. Bancorp was upgraded to Strong buy, with analysts pointing to an expected shift in operating leverage after years of underperformance.
The firm projects more than 200 basis points of positive operating leverage in 2025, reversing a multi-year trend, and sees further improvement in 2026.
Raymond James said the bank’s medium-term financial targets, outlined in September 2024, including a return on assets of 1.15–1.35% and a return on tangible common equity in the high teens, are realistic and could drive renewed investor interest.
The stock trades at a discount to peers, despite an improving earnings outlook.
The firm raised its price target on U.S. Bancorp to $57 from $51 and lifted its 2026 EPS estimate slightly to $4.72.