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On Friday, Goldman Sachs analyst Alexander Blostein raised the rating for Charles Schwab Corp (BVMF:SCHW34). (NYSE: SCHW) stock from Neutral to Buy, setting a price target of $100.00. Blostein provided a positive outlook on the company’s future, highlighting a potential upside of over 25% from its current stock price of $79.38. This optimism aligns with broader analyst sentiment, as InvestingPro data shows 14 analysts have recently revised their earnings estimates upward, with price targets ranging from $65 to $103.
According to Blostein, Charles Schwab (NYSE:SCHW) stands out in an uncertain market environment, offering one of the most robust and sustainable earnings per share (EPS) growth algorithms in the financial sector. The firm is projected to see a compound annual growth rate (CAGR) of 25% through 2027, significantly outpacing the average broker growth of 15% and the broader Financial Select Sector SPDR Fund (NYSE:XLF) at 10%. InvestingPro analysis supports this growth trajectory, revealing strong financial health metrics with a particularly high profit score of 3.18 out of 4, and impressive revenue growth of 10.86% over the last twelve months.
The analyst pointed to several factors underpinning the upgrade. First, balance sheet stabilization is expected to drive a considerable net interest income (NII) acceleration, with an estimated CAGR of around 16% through 2027. Additionally, management’s recent hedging actions are seen as mitigating risks associated with lower short-term interest rates.
Another critical element in Goldman Sachs’ positive assessment is Charles Schwab’s capital position. The firm is rapidly building excess capital, which is estimated to reach approximately $20 billion by the end of 2027. This robust capital base could pave the way for a resumption of significant share repurchases, which is often viewed favorably by investors.
Lastly, Blostein noted signs of durability in Charles Schwab’s organic growth, which appears to be returning to the company’s targeted range of 5%-7%. This improvement in organic growth further supports the analyst’s optimistic view of the company’s stock performance potential in the coming years. Adding to the investment case, InvestingPro data highlights Schwab’s 37-year track record of consistent dividend payments and its current undervaluation based on Fair Value analysis. For deeper insights into Schwab’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Charles Schwab Corporation reported first-quarter earnings that exceeded expectations, with an adjusted earnings per share (EPS) of $1.04, surpassing both Keefe Bruyette & Woods’ estimate and the consensus estimate of $1.01. This earnings beat was attributed to increased revenues and a lower tax rate, though slightly offset by higher expenses. Following the earnings report, Keefe Bruyette & Woods raised their price target for the company’s stock to $93, maintaining an Outperform rating. Similarly, TD Cowen adjusted their target to $95, citing strong performance and management execution as reasons for their positive outlook. In contrast, Truist Securities lowered their price target to $84, maintaining a Buy rating due to economic uncertainty. Meanwhile, Citi maintained a Buy rating with a $102 price target, noting improved net new assets growth and potential for increased capital returns in the future. Additionally, Charles Schwab declared quarterly dividends for both common and preferred stock, reflecting its ongoing commitment to shareholder value. These developments indicate a mixed but generally positive outlook from analysts regarding Charles Schwab’s financial performance and market position.
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