Wells Fargo’s equity research team has highlighted Capital One as a potential stock with a near-term catalyst. Specifically, the firm believes that if the Discover merger goes through, there could be a significant upside for Capital One. Additionally, Wells Fargo suggests that lower-income credit card holders may prove to be more resilient than currently believed, which could positively impact Capital One’s performance. Despite concerns surrounding its credit card holders, Capital One has only risen around 6% this year, underperforming the broader market.
Another stock that Wells Fargo has identified is Algonquin Power & Utilities. The firm believes that the third quarter could provide clarity on the utility’s strategic review of its non-regulated renewables platform. According to Wells Fargo, there is a possibility that the renewable business could be highly valued, potentially fetching $2.4 billion. With proceeds from this valuation, Algonquin could potentially recapitalize and authorize a large share buyback. Despite falling more than 13% year to date, Wells Fargo sees a significant upside potential for Algonquin, with the stock potentially running up more than 44% without considering the dividend.
Wells Fargo also highlights On Semiconductor as a company that is beginning to see the green shoots of a cyclical upturn. The firm believes that this improvement in gross margins could positively impact the company’s performance. Despite suffering as investors spurned automotive chipmakers this year, On Semiconductor could benefit from significant wins from original equipment manufacturers in China, such as BYD, for its silicon carbide chip business. While the stock is currently down more than 14% in 2024, Wells Fargo sees a potential upside of more than 37% from Monday’s close.
Tesla and Old Dominion Freight Line: Potential Downside
On the other hand, Wells Fargo has identified Tesla and Old Dominion Freight Line as stocks that could potentially see downside from negative catalysts in the third quarter. Despite this warning, Tesla has soared 25% this week after reporting better-than-expected second-quarter vehicle deliveries.
Wells Fargo’s equity research team has provided investors with valuable insights into potential stocks with near-term catalysts. While some stocks, such as Capital One, Algonquin Power & Utilities, and On Semiconductor, have the potential for significant upside, others, like Tesla and Old Dominion Freight Line, may face challenges in the near future. Investors are advised to carefully consider these recommendations and conduct their own due diligence before making any investment decisions.