Why Wells Fargo Is Buying $40 Billion of Its Own Stock

May 06, 2025 at 09:35 AM EDT

Wells Fargo

One of the best and most subtle ways companies reward their shareholders is through stock buyback programs, which, contrary to popular belief, are much better than dividend payouts. They are superior because they avoid the double-taxation events that dividends bring and keep capital within a business, subject to further compounding and investment in areas such as acquisitions or paying down debts.

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When a company buys back its stock, it also allows investors to reverse engineer the reasoning behind management's desire to invest in the future of the company they run, figuring out where the upside thesis and potential may be from the timing of the decision. Today, this upside and bullish thesis is centered around the financial sector.

Shares of Wells Fargo & Co. (NYSE: WFC) have been the pick for insiders to start buying under a new share buyback program, worth up to $40 billion, but there is also a very clear fundamental driver behind this decision. Because Wells Fargo is primarily a commercial bank exposed to the cyclicality of consumer credit and debt products like credit cards and mortgages, investors can assume that the outlook for these areas of the economy is positive.

Price Action Gives Subtle Clues

When investors compare the price action in Wells Fargo stock against other banks, the narrative starts to become a bit clearer, allowing for the construction of a thesis. The opposite of a commercial bank would be a corporate bank, where the Goldman Sachs Group Inc. (NYSE: GS) could represent that industry.

Benchmarking performance relative to 52-week high levels is a good way to gauge how the market feels about these names today. Wells Fargo has managed to rise to 92% of its 52-week high price, while Goldman Sachs is lagging at only 80% of its 52-week high.

What this might mean for investors is that the market is looking to take a more defensive view of the financial sector. Fears of negative impacts driven by President Trump's recent rollouts of trade tariffs slow down deal-making activities at corporate banks, and this is when the defensive nature of commercial banks begins to become a preference.

With this in mind, investors could take the behavior as a sign of renewed confidence in the consumer credit space today, which might help create tailwinds for stocks exposed to consumer trends and confidence.

The optimism for this commercial bank has spread beyond just the insiders buying up.

Institutions Warm Up to Wells Fargo Stock

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As of May 2025, other participants decided to gain exposure to Wells Fargo stock. Investors can see this theme at play as institutional allocators from the Massachusetts Financial Services Co. decided to boost their stakes in Wells Fargo by as much as 277.4%.

This new addition brought their net position to a high of $771.1 million today, giving investors another pillar of confidence to lean on moving forward in their potential buy thesis for this commercial bank; otherwise, another evidence point for consumer stocks to keep playing for higher prices in this case.

Considering that the wave of the real estate decline might have some extra legs moving forward, it could be the “hedge” investors need to have clear when considering the potential rebounds implied by the underlying confidence in Wells Fargo’s management in buying back its stock at this fast a pace.

However, the slowdowns in real estate and other consumer credit indicators could be seen from the opposing side. From a risk-to-reward mentality, it makes more sense to consider that the additional downside is severely compressed compared to the upside that can be had on a rebound.

Now that investors have both sides of this opinion, making sense of the market’s take on Wells Fargo is as important as ever in this idea-generation stage. Starting with the earnings per share (EPS) forecasts for the fourth quarter of 2025 in Wells Fargo, things begin to make a lot more sense, as Wall Street analysts see up to $1.62 in earnings.

Compared to today’s reported $1.23 in reported EPS, this would imply a net jump of 32%, creating the fundamental tailwind that can get Wells Fargo and its product demand to higher highs in the coming months and quarters.

In a way, these forecasts and fundamental reasons might also have backed the price action that made Wells Fargo a leader, as well as the justification by insiders themselves to plough $40 billion into the stock.

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Why Wells Fargo Is Buying $40 Billion of Its Own Stock

Price Action Gives Subtle Clues

Institutions Warm Up to Wells Fargo Stock

Where Should You Invest $1,000 Right Now?

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