Jim Cramer’s daily rapid fire looks at stocks in the news outside the CNBC Investing Club portfolio. T-Mobile : The wireless carrier announced plans to pay $4.4 billion to buy most of U.S. Cellular . “Who am I to doubt [T-Mobile CEO] Mike Sievert? They got some growth. So stock going higher,” Jim Cramer said Tuesday. T-Mobile was up just under 1%. U.S. Cellular rose more than 1%. Viking Holdings : The cruise line operator’s stock saw lots of analyst initiations. The company went public on May 1. “They don’t want kids, and they don’t want gambling,” and that’s the appeal of Viking, Cramer said. Airbnb : Shares of the short-term rental company were upgraded to a buy-equivalent outperform rating at Wedbush. “I felt that the quarter was excellent. The app is really good. I disagreed with the market. It’s a hard thing to do. Wedbush is basically giving you the bull case,” Cramer said. Shares dropped 7% after its earnings report on May 9 and were still down $10 since the Friday’s close. Huntington Bancshares : The regional bank stock was upgraded to a buy-equivalent overweight rating at JPMorgan. “I thought that the upgrade made very little sense. But I recognize that Huntington Bancshares is in a good state,” Cramer said. Texas Instruments : CNBC reported that activist investor group Elliott Management has taken a $2.5 billion stake in the chipmaker. Cramer said Texas Instruments didn’t make the right moves with customers and shareholders and that’s why Elliott moved in.
Tag: Viking Holdings Ltd
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Wells Fargo goes on quiet hiring spree to expand from lending. What it means for the stock
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.
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Stocks pop after Fed decision, oil plunges, earnings mixed — what to watch in the market
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. (We’re no longer recording the audio, so we can get this new written feature to members as quickly as possible.) Market check: Stocks surged Wednesday afternoon after the Federal Reserve held interest rates steady at the end of its latest two-day meeting. According to their post-meeting statement, central bankers noted a “lack of further progress” in bringing inflation down to their 2% target. Fed chief Jerome Powell reiterated that concern at his news conference. Powell said that rate cuts would be considered when the Fed feels inflation is on its way to target. “We feel our policy stance is in a good place” and appropriately restrictive, he added. Early in 2024, expectations in the market were for as many as six cuts. Now, there are questions about whether there will be any cuts this year. April, which has historically been one of the stronger months of the year for the market, was rough. Monthly declines in the Dow , the S & P 500 and the Nasdaq broke five-month winning streaks for the three major stock benchmarks. While April overall was terrible, there were some big winners in the Club’s portfolio, including Alphabet up nearly 8%. Before last week’s strong quarter, CNBC learned that Alphabet’s Google had laid off hundreds of employees from so-called core teams. The reorg includes moving some roles to India and Mexico. Crude sinks: U.S. oil prices sank roughly 3% to under $80 per barrel Wednesday. That’s about a seven-week low on West Texas Intermediate crude . The reasons: stockpiles surged on lackluster demand as the U.S. and its international partners continue to push for a ceasefire between the Israelis and Hamas in Gaza. WTI has fallen 9% from its intraday high for the year of $87.67 per barrel. Our lone oil-and-gas stock, Coterra Energy , was down 2% on Wednesday. It’s set to report quarterly results after the close Thursday. Cruise IPO: Viking Holdings shares rose 10% in its debut as a public company Wednesday. The cruise line company Tuesday evening priced roughly 64 million shares at $24 each — toward the higher of the expected range. Viking is the latest in a recent revival of the long-dormant initial public offerings market. The IPO comeback of late has boosted the investment banking arms of Wall Street banks. Morgan Stanley is one of the lead underwriters of the Viking offering. Last month, the Club name delivered a much-needed rebound quarter . Investment banking revenue at Morgan Stanley rose 16% year over year, driven by IPO business. These deals must succeed to entice more private companies to become public, which is crucial to Morgan Stanley. Biggest winners: DuPont was the Club’s biggest winner Wednesday, jumping more than 7% after the chemicals company beat on quarterly earnings and raised guidance. DuPont’s semiconductor business rose 10%, and we see plenty of runway for growth next year thanks to artificial intelligence. GE Healthcare was next, rising nearly 2% after Tuesday’s 14% earnings-driven decline , which we thought was an overreaction. Amazon was our third-best stock, gaining more than 1.5% Wednesday following the e-commerce and cloud giant’s great quarter and what we think was conservative guidance. “There’s no incentive in giving some pie in the sky number,” Jim said during the Morning Meeting . Biggest losers: Starbucks was our biggest loser Wednesday following the terrible quarter and outlook that was out the evening before. Jim blasted the Starbucks CEO in a morning CNBC interview, saying he was “stunned” by Laxman Narasimhan’s lack of awareness of how bad things are at the coffee giant. Estee Lauder was next, dropping 14% after light guidance and worries about China overshadowed quarterly beats. Nvidia was our third-weakest stock Wednesday, dropping more than 5%. The AI chip giant enjoyed a 15% bump last week on all the spending plans from Big Tech. While inching higher Monday, Nvidia also was down 1.5% Tuesday. Club earnings : In a busy week with quarterly reports from 12 portfolio stocks, Thursday brings morning earnings from Linde , Stanley Black & Decker and Bausch Health . After the bell Thursday, Apple is out with its quarter following a bump earlier this week tied to an upgrade from the often-skeptical Bernstein analyst Toni Sacconaghi. Apple has had a rough year, but Sacconaghi sees the pullback as an “attractive entry point.” Jim said the call is ill-advised, and we must wait for the release to see where Apple might go from here. As mentioned earlier, Coterra is also out with earnings Thursday evening, but the post-release conference call won’t be until Friday morning. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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.Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. (We’re no longer recording the audio, so we can get this new written feature to members as quickly as possible.)