Raymond James analysts provided a boost to Charles Schwab (NYSE:SCHW) shares on Monday after he upgraded the stock to Outperform with a $63 price target in a note.
The stock is currently up 2.88% at over $50 per share, adding to Friday's more than 2% gain.
The analysts told investors that they believe recent data indicates that client cash sorting at Schwab is tapering, which "should support balance sheet and net interest margin stabilization in 2H23."
"We do think consensus estimates for 2023/24 remain too high but believe the buy-side is more aligned with our below-consensus views," they wrote.
The analysts acknowledged that "the specter of a stricter regulatory regime may be an overhang for some time" but stated that they think the incremental risk to Schwab's earnings power is "likely to be somewhat limited."
"On the valuation front, elevated cash sorting is a stark reminder of the interest rate risk inherent within Schwab's business model. However, the company has very little credit risk and an attractive core growth story that was unaffected by recent macro events, which we believe can lead to P/E multiple re-rating once EPS estimates stabilize," they concluded.