Jim Cramer’s daily rapid fire looks at stocks in the news outside the CNBC Investing Club portfolio. Bank of America : Piper Sandler upgraded the stock to neutral from underweight (hold from sell) and raised its price target to $42 per share from $37. “It’s becoming the Buffett bank,” Jim Cramer said Tuesday ahead of next week’s earnings. “You’re seeing a recognition that their bond portfolio wasn’t really a danger after all.” Warren Buffett’s Berkshire Hathaway owns a huge stake in BofA. RH : Stifel started coverage of the company formerly named Restoration Hardware with a buy and a $315-per-share price target. CEO Gary Friedman sees an inflection point. “I don’t want to bet against Gary,” Cramer said. “He’s bought a huge amount of stock.” Intel : The struggling chipmaker was trying to rally for the fifth session in a row. Cramer said he’s not a fan of the stock but “every dog has its day.” Netflix : Cowen increased its price target on the stock ahead of earnings next week. “There’s nothing new driving that damn stock,” Cramer said. “It doesn’t matter, though.” Smurfit Westrock : Stifel started coverage of the paper-based packaging company with a buy rating and a $65.70-per-share price target. “There’s been tremendous consolidation in that industry. And yet, it’s still not really been able to get rolling,” Cramer said.
Wells Fargo is breaking out of its lending roots. The bank has quietly gone on a hiring spree to grab a bigger slice of the profitable investment banking business long dominated by its Wall Street rivals. Since the start of 2023, a CNBC analysis found that Wells Fargo made at least 17 senior-level hires in its corporate and investment banking (CIB) division. Leaning on the expertise of its rivals, many of the newly employed executives previously worked at the likes of JPMorgan Chase and other big banks. Expanding investment banking “improves our outlook” on Wells Fargo stock, according to Jeff Marks, director of portfolio analysis for the CNBC Investing Club. “Adding more fee-related revenues to the overall picture makes the bank’s profits less hostage to the bond market yield curve and could improve the overall return profile of the bank.” He added, “Wells Fargo could fetch a higher multiple in the market as a result.” It’s no wonder CEO Charlie Scharf wants a bigger slice of businesses like investment banking, which garner huge revenue from fees. Services like underwriting for initial public offerings (IPO) and facilitating mergers and acquisitions (M & A) allow banks to take home a percentage of these deals and advisory fees. Fees are a more durable and less volatile revenue stream than what Wells Fargo has historically focused on. This is important because, as Scharf said in the bank’s 2023 annual report , the CIB division has positioned Wells Fargo to “increase our fee-based revenues” and “increase our returns overall.” At the top of the recent hire list, however, is Doug Braunstein, a JPMorgan veteran who was brought in as vice chairman in February to help steer Wells Fargo’s corporate finance and advisory businesses. During nearly 20 years at JPMorgan, Braunstein held many roles including chief financial officer, head of investment banking in the Americas, and head of global mergers and acquisitions. Fernando Rivas was named earlier this month co-CEO of corporate and investment banking at Wells Fargo. Formerly head of North American Investment Banking at JPMorgan, Rivas will lead CIB together with Jonathan Weiss, who had been the sole CEO of the division since February 2020. Weiss, also a JPMorgan alum, has been at Wells Fargo since 2005. Rivas had been at JPMorgan for three decades. In addition to those high-profile hires, CNBC found that Wells Fargo also poached top talent from other financial behemoths such as Barclays , Deutsche Bank , Piper Sandler, and now-defunct Credit Suisse — all within the past year. A Wells Fargo spokesperson declined to comment on the total number of CIB-related hires across all levels in the division. However, Wells Fargo’s Scharf said in the press release announcing Rivas’ hire, “We have added over 50 senior bankers and traders since 2020 and have seen the positive impact with increased revenue and market share.” Break from tradition Management has long relied on interest-based revenue streams like net interest income (NII) from its retail and business customers. NII is the difference between what a firm makes on loans versus what it pays for customer deposits. Wells Fargo and other banks have benefited in recent years as the Federal Reserve began hiking interest rates in March 2022. That’s because the cost of borrowing goes up much more than what customers earn on deposits. However, as rates have stayed higher for longer, customers began to withdraw some of their deposits for higher-yielding offerings like money market funds. Wells Fargo said NII decreased 8% during the first quarter, citing interest rate dynamics. Full-year guidance for NII is also expected to decline in the 7% to 9% range. That’s the double-edged sword of rates, which are now expected to be cut by the Fed later this year, and why Wells Fargo was glad to see its CIB-related investments pay off in the first quarter. The division saw a 1.6% increase in revenue to $4.98 billion. During the April 12 post-earnings conference call, Scharf said the bank is “beginning to see early signs of share and fee growth which will be important as we diversify our revenues and reduce net interest income as a percentage of revenue.” From 2019 to the end of 2023, Wells Fargo’s overall investment banking share moved up two ranks in the U.S. market to No. 6, management said in an annual report , citing Dealogic figures. More recent data indicates that Wells Fargo’s investment banking revenue share globally has jumped to No. 7 from No. 12 year-over-year, as of Tuesday. In the investing banking subset of M & A, Wells Fargo has been garnering more fees. The bank has been tapped for a series of high-profile deals as well, including Kroger ‘s attempted nearly $25 billion acquisition of Albertson’s in October 2022. The transaction is in limbo after the Federal Trade Commission filed a lawsuit to block the merger in February . In IPOs, Wells Fargo was among the lead book-running managers of recent IPOs: cruise line Viking and data management firm Rubrik . Wells Fargo shares, which began their upward trajectory back in November, gained more than 50% in the past 12 months — and about half that gain in 2024 alone. That’s roughly double the S & P 500 ‘s performance on both measures. The stock saw its highest close last week of $62.55 since mid-January 2018. Shares have pulled back a bit since then but remain only about 7.5% away from its all-time high close of $65.93 at the end of January 2018. In recognition of that strength, the Club trimmed its Wells Fargo position in late April and booked a healthy profit on the trade. While still bullish, we wanted to reduce the stock’s overall weighting in a show of portfolio discipline. It was near the 5% threshold that we don’t like exceeding in order to run a diversified portfolio. The Club has a 2 rating on the stock and a $62 price target . WFC mountain 2018-01-26 Wells Fargo since record high close on Jan. 26, 2018 Moving forward Wells Fargo’s CIB expansion bodes well once the firm’s Fed-imposed $1.95 trillion asset cap is gone. Although the timing is uncertain, Wells Fargo secured a key win with regulators in February after the Office of the Comptroller of the Currency terminated a penalty tied to the bank’s 2016 fake accounts scandal. That so-called consent order was believed to be a major factor in the Fed’s decision to cap Wells Fargo’s asset levels in 2017. Those regulatory burdens for past misdeeds at the bank predated Scharf’s tenure who has been clearing them since becoming CEO in 2019. Piper Sandler analyst Scott Siefers has said that Wells Fargo will be able to compete more effectively against other large Wall Street firms once the growth cap is removed. “Wells Fargo on a relative basis is very undersized in businesses such as investment banking,” Siefers told CNBC in March . “So, one part of the investment banking business is being able to commit capital. In other words, put some risk on your balance sheet. But thanks to the asset cap, Wells has not been able to build out its investment bank to the same degree, as have some of its other peers.” (Jim Cramer’s Charitable Trust is long WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
A woman walks past Wells Fargo bank in New York City, U.S., March 17, 2020.
Jeenah Moon | Reuters
Wells Fargo is breaking out of its lending roots. The bank has quietly gone on a hiring spree to grab a bigger slice of the profitable investment banking business long dominated by its Wall Street rivals.
JPMorgan Chase’s report before the bell Friday could kick off the first-quarter earnings season on a positive note, according to Wall Street analysts. The banking giant is expected to report earnings of $4.15 per share and $41.84 billion in revenue, according to LSEG. Many analysts also anticipate an upward revision to net interest income guidance, with the firm already forecasting $90 billion for the full year. “JPM has to us the best mix of attributes among the universals: ultra-conservative [net interest income] guidance that probably needs to be revised upward, strong capital base/return potential, excellent risk profile, and great positioning for this IB recovery,” wrote Piper Sandler’s Scott Siefers. JPM YTD mountain JPMorgan shares in 2024 Guidance updates represent the most significant stock driver for JPMorgan and the broader group this earnings reporting season, according to Morgan Stanley’s Betsy Graseck. The stock has already outperformed the broader indexes year to date, rallying nearly 15%. Graseck views JPMorgan as one of the best-positioned stocks for upward net interest income revisions, also highlighting its significant excess capital relative to others within the firm’s coverage. Her earnings estimate sits 17 cents above expectations, and she holds an overweight rating and $221 price target on shares, implying 13% upside from Wednesday’s close. What else to watch If not during earnings, this upward guidance adjustment to net interest income could occur at JPMorgan’s investor day in May, she said. Commentary alluding to a second dividend hike or an uptick in buybacks could also boost the stock. “Management has already alluded to JPM being asset sensitive, saying at a recent industry conference that at the margin, cuts coming out of the forward curve would be a tailwind to this year’s revenues,” Graseck wrote. Goldman Sachs analyst Richard Ramsden also highlighted JPMorgan as one of its most constructive buy-rated names, due in part to its conservative net interest income projections for 2024 based on muted deposit beta and loan growth estimates. He holds a buy rating on shares and $229 price target. Analysts also view the prospect of fewer rate cuts as a potential tail wind for JPMorgan this season and beyond. Sticky inflation and hotter-than-expected economic data have shifted Federal Reserve rate cut expectations, with traders now pricing only a slim likelihood of a cut at the central bank’s June meeting, according to CME Group’s FedWatch tool . Fewer rate cuts, coupled with conservative deposit cost estimates, could power upward earnings per share adjustments for the firm, according to Bank of America’s Ebrahim Poonawala, with a buy rating and $220 price objective on shares. “Less cuts in the curve imply that this will take more time to cure,” said UBS analyst Erika Najarian. “JPM’s ~$600bn of cash at the Fed — larger than its securities book — make it particularly well suited to continue to generate NII during times of curve inversion, where most of its peers need a steeper curve eventually for NII to recover.” Another key figure some analysts are watching is earnings from First Republic, which the company took over in May 2023 . The collapse marked the largest bank failure since the 2008 financial crisis. While most of these integrations will conclude later this year, Wells Fargo’s Mike Mayo noted that annual incremental earnings from First Republic are expected to hit $2 billion, which would add 40 cents to EPS estimates. He holds an overweight rating and $220 price target on shares. Goldman Sachs’ Ramsden said “revenue synergies” from this deal could prompt an upside surprise in fee revenues.
Maplewood, Minnesota, 3M company global headquarters.
Michael Siluk | Universal Images Group | Getty Images
Check out the companies making headlines in premarket trading.
General Motors — Shares of General Motors rose more than 1% after the automaker raised its full-year guidance and reported second-quarter results that rose on a year-over-year basis.
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3M – Shares of the chemical manufacturer rose about 2% in premarket trading following the company’s latest earnings report. 3M posted $7.99 billion in revenue, beating analysts’ estimates of $7.87 billion, according to Refinitiv. The company also raised its full-year earnings guidance and reaffirmed its revenue guidance.
Xerox — The workplace technology provider advanced 3.6% after beating earnings expectations for the second quarter, posting 44 cents per share excluding items against a 32-cent forecast from analysts polled by FactSet. Quarterly revenue came in line with expectations at $1.75 billion. Xerox also said to expect free cash flow and the adjusted operating margin to be better than previously anticipated for the full year.
General Electric — Shares of the industrial giant jumped more than 4% in premarket trading after the company posted stronger-than-expected earnings for the second quarter. GE also boosted its full-year profit guidance on the back of strong demand from aerospace and record orders in its renewable energy business.
Danaher — Shares of the conglomerate slid 4.6%. Danaher said non-GAAP core revenue in the base business will be down in the current quarter compared with the same quarter a year ago and would be up less than previously expected for the full year. However, the company gave a strong quarterly report, posting second quarter earnings per share excluding items at $2.05 and revenue at $7.16 billion, while analysts polled by FactSet anticipated $2.01 per share on $7.12 billion in revenue.
Spotify — The music streaming platform dropped 6.1% after presenting a weak quarterly report and guidance. Spotify reported revenue of €3.18 billion, below a Refinitiv forecast of €3.21 billion. Full-year revenue guidance was also worse than analysts expected. The report follows Spotify’s announcement that it will raise prices for premium subscription plans.
Lilium — The electric helicopter stock added 5.6% after management released a letter to shareholders. In the letter, management said adjusted cash spend for the first half of 2023 was within budget and the company was successful in an audit from the European Union Aviation Safety Agency.
Alaska Air — Shares of the airline fell more than 4% even after Alaska beat estimates on the top and bottom lines for the second quarter. Alaska reported $3 in adjusted earnings per share on $2.84 billion in revenue. Analysts surveyed by Refinitiv were expecting $2.70 in earnings per share on $2.77 billion in revenue. The airline’s full-year earnings guidance of $5.50 to $7.50 per share was roughly in-line with the average analyst estimates of $6.65, according to FactSet.
RTX — Shares of the company formerly known as Raytheon slipped 3% despite a strong quarterly report. RTX ported $1.29 in earnings per share, excluding items, on $18.32 billion in revenue. Analysts polled by Refinitiv forecasted $1.18 per share and $17.68 billion. The company also raised its full-year expectations for both lines.
Verizon — The telecommunications giant traded 2.6% higher after reaffirming its full-year guidance. That came despite a mixed second quarter, with Verizon posting $1.21 in earnings per share, excluding items, on $32.6 billion in revenue. Analysts polled by Refinitiv estimated $1.17 earnings per share and revenue of $33.24 billion.
Walmart — Walmart rose more than 1% after Piper Sandler upgraded the big-box retailer Monday to overweight from neutral, and hiked its price target. Analyst Edward Yruma said Walmart could take greater market share in the grocery business as inflation eases.
— CNBC’s Samantha Subin, Yun Li, Jesse Pound, Sarah Min and Tanaya Macheel contributed reporting
Recent updates from bank executives reinforce the idea that while deposits have stabilized, the industry faces pressure from rising funding costs, weaker lending and coming regulations, according to Piper Sandler analysts. Disclosures from conferences in the past week compelled Piper Sandler to cut its 2023 per share earnings estimates by a median 4.8%, with bigger declines for regional firms compared with the large banks, analysts led by R. Scott Siefers wrote Thursday. The analysts named two picks for the current environment: “From here, our favorite large regional is Fifth Third Bank , and we find U.S. Bank a compelling value for patient investors,” Siefers wrote. Regional bank stocks have r ebounded off the year’s lows in recent weeks. The group plunged in March after the sudden collapse of Silicon Valley Bank, an event that ultimately claimed two more midsized lenders. Concerns over further deposit runs have calmed, but attention has now shifted to medium and longer term headwinds for the industry. “Undoubtedly, the deposit panic from earlier this spring has subsided,” Siefers wrote. “But one lasting impact from March’s shock is that depositors have clearly awoken to how much they can earn on their $, which in turn continues to put more visible pressure on funding costs.” The analyst said that customers’ move away from non-interest bearing deposits and falling demand for loans have prompted several regional banks to lower their 2023 guidance for net interest income. NII, which is the interest generated by loans and investments after paying depositors, is one of the main sources of revenue for banks. Given that backdrop, Piper Sander focused on two “buy”-rated banks that could outperform their peers. Fifth Third Bank is “now among the most conservative on through-the-cycle [deposit] assumptions and preparedness for a sustained challenging environment,” Siefers wrote. “As such, the company should be better protected than some others.” U.S. Bank’s earnings story is “holding in as well as we could hope” and investors will be “well-rewarded for owning an excellent company” with “best-in-class” returns, he added. With contributions from CNBC’s Michael Bloom
A gallery assistant wearing an Oculus Quest 2 virtual reality (VR) headset to view the House of Fine Art (HOFA) Metaverse gallery stands in front of digital artwork “Agoria, _{Compend-AI-M}_ 2022 #16” during a preview in Mayfair, London, UK, on Thursday, Nov. 10, 2022.
Hollie Adams | Bloomberg | Getty Images
Virtual reality hasn’t caught on with American teens, according to a new survey from Piper Sandler released on Tuesday.
While 29% percent of teens polled owned a VR device — versus 87% who own iPhones — only 4% of headset owners used it daily, the investment firm found, and 14% used them weekly.
In addition, teenagers didn’t seem that interested in buying forthcoming VR headsets. Only 7% said they planned to purchase a headset, versus 52% of teens polled who were unsure or uninterested.
The survey results suggest that virtual reality hardware and software has yet to catch on with the public despite billions of dollars in investment in the technology from Big Tech companies and a number of low-cost headsets on the market. Teenagers are often seen as early adopters of new technology and their preferences can provide a preview of where the industry is going.
“To us, the lukewarm usage demonstrates that VR remains ‘early days’ and that these devices are less important than smartphones,” Piper Sandler analysts wrote.
The survey also shows that VR is struggling to gain traction as Applereportedly prepares to announce its own headset as soon as this year. The survey suggests that it may have an uphill climb to convince potential customers.
Facebook parent Meta is also expected to release new virtual reality headsets later this year. Its Quest 2 headset, which was released in 2020, is by far the leader in the market terms of sales, but shipments declined last year, according to analysts.
Piper Sandler’s teen study surveyed more than 5,600 teens in the U.S. in February.
