Bullish indicating open at $55-$60, IPO prices at $37
On Monday, Truist Securities updated its financial model for Charles Schwab Corp (BVMF:SCHW34). (NYSE: SCHW), leading to an increased price target and a reaffirmed positive outlook on the company’s stock. The adjustment follows the news that TD Bank will be divesting its approximately 10% stake in Charles Schwab (NYSE:SCHW), with the latter participating in the transaction through a $1.5 billion buyback. The stock, currently trading at $81.22, has shown remarkable strength with a 33.74% gain over the past six months, according to InvestingPro data.
The buyback amount, representing about 1% of Schwab’s $148.77 billion market capitalization, is double the $750 million that had been anticipated for the first quarter of 2025. Truist Securities has also slightly increased its buyback expectations for the second quarter of 2025 and made minor adjustments to the projected noninterest income, resulting in an overall increase of less than 0.5%. InvestingPro analysis suggests the stock is currently slightly undervalued, with 13 analysts recently revising their earnings expectations upward.
These revisions have led to an enhancement in the earnings per share (EPS) estimate for Charles Schwab, with a 1% increase for both the 2025 and 2026 forecasts. The 2025 EPS estimate is now set at $4.05, while the projection for 2026 is $5.05. Consequently, the price target for Schwab’s stock has been raised to $91, up from the previous target of $90.
The valuation multiple applied by Truist Securities remains at 18.0 times the estimated 2026 EPS, which underpins the new price target. The firm continues to recommend a Buy rating for Charles Schwab stock, signaling confidence in the company’s financial performance and stock value in the coming years.
In other recent news, Toronto Dominion Bank (NYSE:TD) has announced a stock buyback plan following its decision to sell its equity investment in Charles Schwab. The bank plans to repurchase up to 100 million of its common shares, a move that is contingent upon the successful completion of its Schwab share sale, regulatory approvals, and acceptance by the Toronto Stock Exchange. The bank’s strong capital ratios as of October 2024 support its capacity to undertake this proposed share buyback.
Charles Schwab Corporation, on the other hand, has announced its own plans to repurchase approximately $1.5 billion of its shares. This comes as TD Bank discloses its decision to divest its entire stake in the company. Analysts from Wolfe Research and Jefferies have maintained a positive stance on Charles Schwab, reiterating their Outperform and Buy ratings respectively, despite the recent developments.
These recent shifts in strategy have been influenced by a strategic review of capital allocation by both companies. TD Bank’s CEO, Raymond (NSE:RYMD) Chun, has expressed confidence in the bank’s long-term growth prospects, with a portion of the proceeds from the Schwab share sale to be invested back into the bank’s business. Meanwhile, Charles Schwab’s decision to buy back a larger amount of shares than expected could indicate a readiness to return capital to shareholders sooner than previously thought.
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