Finance

The Wells Fargo scandal isn't as bad as it looks, Baird analysts say

John Stumpf, chairman and CEO of Wells Fargo.
Lacy O'Toole | CNBC

For Wells Fargo, this may be the bottom.

Baird Equity Research is telling its readers to catch that falling knife ahead of Tuesday's Senate hearing, where lawmakers will grill CEO John Stumpf about Wells Fargo's customer account fraud.

Analysts on Monday upgraded Wells Fargo's rating from neutral to outperform and assigned a price target of $50 per share to its stock, coming less than two weeks after the bank's shares began a tumble that would cost them more than 10 percent of their value. The stock was changing hands at around $46 on Monday.

"The stock has gone from loved to loathed in two to three weeks," analysts wrote, "and we believe the sell-off creates a good relative buying opportunity."

Marcus Lemonis: Wells Fargo CEO might be responsible
VIDEO1:2001:20
Marcus Lemonis: Wells Fargo CEO might be responsible

Other big banking scandals, such as JPMorgan Chase's so-called London whale, have had a meaningful effect on banks' balance sheet, Baird analysts wrote. Although shares of Wells plunged in recent days as legislators' criticism stacked up, "revenue impact for [Wells Fargo] does not even compute to a penny [per] share."

The bank was rapped with a $185 million fine by agencies including the Consumer Financial Protection Bureau two weeks ago, and since then, lawmakers have piled pressure onto Wells Fargo executives. On Tuesday, CEO Stumpf is expected to testify in a Senate banking committee hearing. He's also to testify before the House Financial Services Committee this month.

To be sure, other analysts' long-term view on the bank is not as optimistic. A Fitch Ratings report said the bank's pledge to eliminate product sales goals for retail staffers could have an impact on Wells Fargo's revenue.

"We believe this issue creates reputational risk given the issue and allegations are understandable to the general public, in a way that misdeeds at other banks are not," Fitch analysts wrote Monday.