Charles Schwab (SCHW) may have posted mixed results for its third-quarter and is facing increased competition in the low-cost ETF marketplace, but shares are still trading below analysts' targets.
Recently Schwab’s stock was down 0.85% or $0.37 to $43.11 a share on light volume of 1.1 million shares. Average daily volume is 6.5 million shares. While the stock is trading closer to its 52-week high of $46.21 than its low of $30.66, analysts are betting it can go higher. Shares are more than 11% lower than the average Wall Street price target, which stands at $48.94, according to the Wall Street Journal. The highest price target is at $54 a share while the lowest stands at $44. Of the analysts that cover the stock, 15 have buy ratings while four rate it a hold. There are no sell ratings on the stock. According to Economic Money, Charles Schwab has a 20-day Stochastic %k measure of 53.13%, which implies shares are trading in neutral territory at its current price. A Stochastic %k measure of 70% implies the stock is overvalued while a score of under 30% means it's undervalued.
After a steep sell-off at the end of August, the San Francisco-based discount broker’s stock price has been climbing, jumping nearly 5% since then. The company benefited from a rally in financial stocks, with investors betting President Donald Trump’s tax reform will bode well for the company. The White House is proposing a lower corporate tax rate and a tax holiday for bringing money back in from overseas. With little business outside the U.S. that means that if tax reform does get passed and the corporate tax rate is reduced, Schwab stands to benefit the most. On top of that, because it doesn’t have big exposure overseas, it won’t suffer as much as rivals from a weakening U.S. dollar. If the U.S. dollar stays weak next year it could increase interest in stocks like Charles Schwab.
For the third-quarter reported earlier this week, Schwab posted earnings per share of $0.42 and revenue of $2.165 billion. Analysts, according to Zacks, had expected it to report earnings of $0.41 a share and revenue of $2.9 billion. Had it delivered on the revenue front it would have represented a 14% year-over-year increase. Trading revenue declined 21% to $151 million. It marks the third quarter in a row in which trading revenue dipped on a year-over-year basis. For the second-quarter, it fell 22% to $157 million, due in large part to the full effect of reductions in commissions that were instituted in February. Meanwhile, in the first-quarter, trading revenue was down 17% to $192 million compared to the first-quarter of 2016. Net interest revenue increased 28% to $1.08 billion while revenue from asset management fees jumped 8% to $861 million. During the quarter Schwab was able to open 216,000 new retail brokerage accounts, which is up 29% from last year’s third quarter. Total client assets increased 17% to $3.18 trillion and core net new assets jumped 72% to $51.6 billion.