2024-04-12 19:31:58 ET
Summary
- Charles Schwab was embattled throughout 2023 due to drama in the banking sector and an issue with cash sorting.
- The company has continued to grow AUM well which demonstrates fundamental long-term strength and its valuation has reverted to the mean in recent months.
- Cash sorting and higher interest expenses may hinder Schwab's ability to beat the market in the short-to-medium term. Therefore, I'm downgrading the stock to a Hold.
Business Overview
I initiated coverage of Charles Schwab ( SCHW ) in August of 2023 with a Strong Buy rating at the price of $56.46. Schwab has outperformed the S&P since, posting a 25% total return vs. 16% from the index. Historically, Schwab has outperformed the wider index marginally and industry peers significantly:
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For further details see:
Charles Schwab Earnings Preview: Cash Sorting Remains An Issue (Rating Downgrade)