Hold Rating on Charles Schwab Amid Mixed Growth Signals and Ameritrade Synergies

Charles Schwab (SCHW – Research Report), the Financial sector company, was revisited by a Wall Street analyst today. Analyst Michael Cyprys from Morgan Stanley maintained a Hold rating on the stock and has a $73.00 price target.

Michael Cyprys has given his Hold rating due to a combination of factors that influence the potential of Charles Schwab’s stock. The Investor Day presentation highlighted management’s positive outlook for growth across various channels and the expected synergies from the Ameritrade deal. However, the near-term guidance presented was softer than anticipated, suggesting that the second quarter earnings per share might not surpass those of the first quarter, and the expectation for 2024’s expense growth was slightly higher than the previously anticipated zero percent. Despite this, there is a forecasted strong earnings per share compound annual growth rate through 2026.
The rating also considers the potential for Charles Schwab to expand in the future, particularly through lending, advice, and personalization services, as well as the anticipated benefits from Ameritrade revenue synergies. The company’s balance sheet strategy is set to evolve, with management considering a more capital-efficient model over time. Additionally, the RIA business sector could see an uptick in growth for 2024, driven by a backlog of demand from breakaway advisors who delayed joining Charles Schwab during the Ameritrade conversion process. These factors, combined with expectations for consistent organic net new asset growth annually, shape Cyprys’s Hold rating for Charles Schwab.

In another report released today, Barclays also assigned a Hold rating to the stock with a $75.00 price target.

Based on the recent corporate insider activity of 105 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of SCHW in relation to earlier this year.

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Charles Schwab (SCHW) Company Description:

Founded in 1986, The Charles Schwab Corp. is a savings and loan holding company, which provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. It primarily operates through two segments, Investor Services and Advisor Services. The company is based in San Francisco, California.