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On Monday, Charles Schwab Corp. (NYSE:SCHW) shares rose following an endorsement from Citi, where analyst Chris Allen maintained a Buy rating and a $102.00 price target. The company, currently valued at $138.28 billion by market cap, appears undervalued according to InvestingPro Fair Value metrics. Allen’s positive outlook came after Charles Schwab reported first-quarter earnings that surpassed expectations and showed a promising start to the second quarter, characterized by high trading volumes, increased cash balances, and a rise in account openings. Notably, 11 analysts have recently revised their earnings estimates upward for the upcoming period.Want deeper insights? InvestingPro subscribers have access to comprehensive analysis and additional ProTips about Charles Schwab’s financial health and growth prospects.
The company’s Net New Assets (NNA) growth trends are showing signs of improvement, which Allen believes is crucial for the company’s future performance. This aligns with Schwab’s strong revenue growth of 10.86% over the last twelve months and projected 15% growth for fiscal year 2025. He noted that Charles Schwab is aggressively pursuing growth, with initiatives aimed at deepening client relationships and driving NNA growth towards its historical range of 5-7% over the long term.
Allen also pointed out that Charles Schwab’s supplemental funding costs are decreasing, and with the company experiencing favorable trends in transactional cash, NNA growth, and securities maturities/interest, further progress is anticipated in the upcoming quarters. Additionally, management at Charles Schwab hinted at the possibility of increased capital returns in 2025, with expectations for this to accelerate in 2026 due to projected earnings growth and capital generation.
In his comments, Allen emphasized that Charles Schwab stands out as one of Citi’s top picks within the brokerage sector. The company’s aggressive stance on growth and the expected increase in capital returns were highlighted as key factors contributing to this positive assessment.
In other recent news, Charles Schwab Corporation reported first-quarter 2025 adjusted earnings per share of $1.04, surpassing analysts’ expectations of $1.01. The company’s revenue exceeded projections by $58 million, although expenses were slightly higher than anticipated. In a strategic move, Charles Schwab announced a minority investment in Wealth.com, aiming to enhance its wealth management offerings. This investment focuses on estate planning services, leveraging artificial intelligence to streamline legal document creation. Analyst firms have shown varied responses to Schwab’s performance, with JMP Securities maintaining a Market Outperform rating and a $94 price target, while Barclays (LON:BARC) and JPMorgan both reiterated Overweight ratings with price targets of $84 and $92, respectively. Morgan Stanley (NYSE:MS) upgraded Schwab’s stock rating from Equal-weight to Overweight, despite lowering the price target to $76, citing the company’s earnings recovery potential. Analysts emphasized Schwab’s defensive characteristics and its ability to adapt to the current economic environment. Investors are keenly awaiting further insights from Schwab’s upcoming earnings report to assess the impact of these strategic initiatives.
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