Wells Fargo (WFC)

Wachovia is trading at a $5.50/share premium to tangible capital/common share of ~$14.50, calculated as follows:

• Common Share Count: 2,138 million (1,992 at quarter-end plus 146 issued in April)
• Tangible Capital: $31.0 billion (quarter-end book value of $78.0 less intangibles of $45.1 and preferred of $5.8, plus proceeds of $3.9bn from common issued in April)

This premium represents 4.3% of low-cost deposits of ~$278 billion, below the minimum premium of 5% an acquirer would likely pay. This value-based analysis fails if you believe write-downs and credit losses will absorb the entire go-forward earnings power of Wachovia (because then book value will fall further).

I do not think this likely (and will post later on why) hence WB looks like a buy to me.

Wikinvest © 2006, 2007, 2008, 2009. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.