5. The Charles Schwab Corporation (NYSE:SCHW)
Upside Potential as of January 9: 11.96%
One of the Best Financial Stocks, The Charles Schwab Corporation (NYSE:SCHW), a savings and loan holding company, was established in 1986 and offers a range of services, including banking, asset management, wealth management, custody, and financial advising. Investor Services and Advisor Services are its two main business segments.
The Charles Schwab Corporation (NYSE:SCHW) became the biggest retail broker in the US by client assets after acquiring TD Ameritrade, which strengthened its offerings for individual investors and improved trading. As of the end of July, Schwab’s total customer assets stood at $9.57 trillion, a growth driven by the increase in new assets. This translates to a 2% monthly rise and a 16% annual increase. Among the monthly accomplishments were 327,000 new brokerage accounts and $29 billion in core net new assets.
The Charles Schwab Corporation (NYSE:SCHW) produced strong third-quarter results, with net revenues rising 5% year over year to $4.8 billion, fueled by market performance and ongoing investor engagement. The company’s total client assets reached a record $9.92 trillion, up 27% year on year, thanks to solid asset acquisition and equity market resilience. The quarter’s core net new assets came to $95.3 billion, increasing the year-to-date total to $252.1 billion, a 10% increase over 2023. The adjusted diluted earnings per share were stable at $0.77, while the adjusted net income was $1.5 billion. Trading revenue rose 4% year over year, while adjusted pre-tax profit margins improved to 41.2%. Along with continuing to cut back on supplemental funding, Schwab also reported sequential growth in client transactional sweep cash balances, reaching $384 billion. These outcomes highlight Schwab’s solid operating momentum and careful financial management.
The Charles Schwab Corporation (NYSE:SCHW)’s strong market position and development potential have led analysts to award the company a Buy recommendation. The average price objective indicates a possible gain of 11.96% from the current stock price of $73.00.
Natixis Global Asset Management’s Harris Associates was the largest stakeholder in the company among the funds in Insider Monkey’s database. It owns 28.23 million shares worth $1.83 billion as of Q3.
RiverPark Large Growth Fund stated the following regarding The Charles Schwab Corporation (NYSE:SCHW) in its Q3 2024 investor letter:
“The Charles Schwab Corporation (NYSE:SCHW): SCHW was a top detractor in the third quarter following an uneven second quarter earnings report. After two quarters of stabilization of client deposits and continued reduction of short-term high-cost funding, both metrics reversed in the second quarter causing the company to lower near term EPS expectations. Client deposit accounts, though no longer materially impacted by cash sorting (clients moving cash to higher yielding instruments), declined more than expected as clients used this cash to pay taxes. Lower than expected deposits in turn limited SCHW’s ability to continue to pay down higher cost funding sources ultimately leading to lower spread income. While near term EPS expectations were lowered, we believe that 1) higher spreads should still materialize even if delayed and 2) client assets in the aggregate continue to grow at a healthy pace driven by market gains and organic growth.
Schwab has been the leading share gainer in the discount brokerage industry over the last decade, generating substantial organic asset growth while also growing operating margins and remaining amongst the price leader on all products. Revenue should continue to accelerate in the coming quarters as lower interest-bearing assets mature, which will allow the company to pay back higher cost short-term funding and invest at higher prevailing rates. We believe the company has emerged from the mini bank crisis of 2023 in an even stronger position to gather assets and drive long-term margins and free cash flow in the years to come.”