Wells Fargo Upgraded As Recent Stock Selloff Appears "excessive"

Wells Fargo & Co.'s stock climbed 0.7% in premarket trade Monday, after R.W. Baird turned bullish on the banking giant, citing an improved valuation following the recent selloff. Analyst David George raised his rating to outperform from neutral, and kept his stock price target at $50, which is 10% above Friday's closing price of $45.43. The stock had plunged 11% month to date in the wake of the illegal sales practice scandal that led Wells Fargo to be fined $185 million by regulators, while the S&P 500 has slipped 1.5%. George said recent headlines about the illegal sales practices were a "black eye" for the bank, but he believes pessimism in the stock is likely to peak over the coming days, as the loss of $25 billion in market value related to a $2.6 billion revenue loss is excessive. "The stock has gone from loved to loathed in two to three weeks, and we believe the selloff creates a good relative buying opportunity," George wrote in a note to clients. He believes the stock's dividend yield 3.4%, as of Friday's closing price--The S&P 500's dividend yield is 2.14%--should limit the downside.

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