2023-07-10 08:57:04 ET
JMP Securities analyst Devin Ryan upgraded Charles Schwab Corp. ( NYSE: SCHW ) to Outperform from Market Perform as recent data indicate that so-called "cash sorting" has stabilized over the last quarter.
Cash sorting is when clients pull their cash out of low-interest rate accounts and put it into higher-yielding assets.
"The cash sorting headwind has been most extreme for Schwab ( SCHW ) and therefore we estimate any stabilization (and improvement) will provide some relief in valuation," Ryan wrote in a note to clients.
Schwab ( SCHW ) stock gained 1.5% i n Monday premarket trading.
In addition, the company's Q2 guidance suggesting weaker performance has put valuations in a better position regarding earnings in that downward revisions are in the rear-view mirror, the analyst said.
"Accordingly, we think Schwab ( SCHW ) represents an interesting trade into the low $70 range." His new $73 target reflects a ~19x price/earnings multiple on JMP's 2024 EPS for SCHW, or ~13.5x on JMP's normalized EPS estimate.
Ryan currently sees LPL Financial ( LPLA ) as the best opportunity for a resurgence in advisor recruiting, a key trend that JMP is tracking.
Ryan's Outperform rating contrasts with the SA Quant rating and the average SA Analyst's rating , both at Hold, and aligns with the average Wall Street rating of Buy.
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Charles Schwab sees Q2 revenue falling up to 11% amid NIM compression
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Charles Schwab sees Q2 revenue falling up to 11% amid NIM compression
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Charles Schwab riased to Outperform at JMP as cash sorting headwinds abate