On Friday, TD Cowen made a bullish move on Charles Schwab Corp. (NYSE: NYSE:SCHW), raising its stock rating from Market Perform to Outperform and setting a new price target of $87.00.
The firm anticipates a positive shift in the latter half of 2024, with expectations of a significant seasonal drop in client cash sweep due to tax payments in April.
The upgrade is based on several key factors, including increased confidence in client cash sorting peaking and an expected favorable inflection point. TD Cowen foresees a higher net interest margin for Charles Schwab through 2024 and 2025, driven by more favorable reinvestment rates. This is expected to have a particularly strong impact on Schwab's business compared to its peers.
The firm also predicts that investors will start valuing the company based on projected earnings growth into 2026 and potentially 2027. The analyst projects Charles Schwab's earnings to exceed $5.00 per share in 2026, which would represent a compound annual growth rate (CAGR) of around 20% over three years. While not formally modeled, preliminary estimates suggest earnings could surpass $6.00 per share by 2027, doubling from the 2023 earnings trough of $3.13 per share.
TD Cowen's outlook includes the expectation of a positive investor day update in May, which could provide further insights into Charles Schwab's financial trajectory and strategic initiatives. The firm's analysis indicates a robust growth outlook for the brokerage giant, positioning it as an attractive stock for investors focusing on long-term earnings expansion.
InvestingPro Insights
Charles Schwab Corp. (NYSE: SCHW) has been garnering attention with its robust fundamentals and strategic market positioning. According to InvestingPro data, the company boasts a substantial market capitalization of $131.08 billion, reflecting its significant presence in the financial services industry. The firm's Price/Earnings (P/E) ratio stands at 28.17, with an adjusted P/E based on the last twelve months as of Q4 2023 at 24.91, indicating market expectations of future earnings growth.
InvestingPro Tips highlight that Charles Schwab is trading near its 52-week high, with a price percentage of 99.79% of this peak, suggesting strong market confidence. This aligns with the bullish sentiment expressed by TD Cowen. The company has also demonstrated a commitment to shareholder returns, maintaining dividend payments for 36 consecutive years, with a current dividend yield of 1.39% and a notable dividend growth of 13.64% in the last twelve months as of Q4 2023.
For investors keen on exploring further insights, additional InvestingPro Tips reveal that Charles Schwab's short-term obligations exceed its liquid assets, which may warrant attention. However, analysts predict profitability for the year, and the company has been profitable over the last twelve months. With a large price uptick over the last six months, yielding a 31.4% return, the momentum seems to be in favor of Charles Schwab. Subscribers can uncover even more detailed analysis and tips on Charles Schwab by visiting https://www.investing.com/pro/SCHW, with PRONEWS24 offering an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Investors should note that there are 5 additional InvestingPro Tips available, which could provide further depth to their research and investment decisions.
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