Goldman Sachs’ derivatives research team said investors should pay attention to the options market and bet on Wells Fargo’s long-awaited rebound. Wells Fargo looks like an options trading candidate ahead of its earnings report, John Marshall, the firm’s head of derivatives research, said in a note to clients. Goldman Sachs analyst Richard Ramsden is optimistic about Wells Fargo’s prospects for the rest of the year, he said. “Richard is constructive on WFC heading into Q2 2024 earnings as he believes 2024 NII guidance and earnings will rise on accelerating loan/deposit growth and potential asset cap lift,” the report said. Wells Fargo is scheduled to release its latest earnings report before the bell on Friday. Marshall recommends investors look at call options with a $61 strike price expiring later this month. A call option gives the holder the right to purchase stock at a preset strike price. They bet that stocks will rise above the strike price, allowing shares to be purchased at a discount. The risk of the trade is that the stock trades below the strike price until expiration and the premium paid to purchase the option is lost. WFC 5Y Mountain Wells Fargo is off to a strong start in 2024 after a long period of underperformance. Wells Fargo, a long-standing underperformer among bank stocks, remains under regulatory constraints related to its former CEO’s fake accounts scandal. However, the stock has gained more than 20% this year, and Goldman Sachs sees signs that the bank’s fundamentals may exceed expectations. “WFC expects NII (net interest income) to fall by 7-9% annually in 2024, and Richard sees this guidance as beneficial as he expects NII to fall by only 7% in 2020 due to higher deposit and loan growth. Richard believes , if the Fed lifts the asset cap on World Financial Corp., it would bring multiple tailwinds to earnings growth — CNBC’s Michael Bloom contributed reporting.
