4 Reasons This Analyst Is Bullish On Charles Schwab

Bank of America recently hosted a bull-bear debate on Charles Schwab Corporation SCHW and came out firmly on the bullish side of the camp.

The Analyst: On Wednesday, Bank of America analyst Michael Carrier reiterated his Buy rating and $70 price target for Charles Schwab.

The Thesis: During the debate, Carrier said Schwab bears raised some compelling points against the stock. Bears said retail engagement in the stock market is likely at or near peak levels. In addition, Schwab’s cash balances may start to level off, suggesting the company could have difficulty offsetting interest rate headwinds.

In addition, the risk that regulators change the rules related to payment for order flow, following the recent WallStreetBets-driven market volatility, could force changes to Schwab’s business model.

Despite the concerns, Carrier says he still sees more pros than cons to owning Schwab stock.

“Despite some uncertainty around the surge in retail trading and potential regulatory topics/changes, as well as low short rates, we continue to like the outlook for SCHW and see multiple drivers of upside ahead,” he wrote.

Related Link: How And Why Did The Stock Market Crack?

He listed the following four reasons he’s bullish on Schwab:

1. Retail investor engagement isn’t going away any time soon.
2. There are plenty of expense synergies following the TD Ameritrade buyout.
3. Schwab is still gaining market share due to its innovative products.
4. Rising interest rates are a long-term bullish catalyst.

Benzinga’s Take: By far the biggest risk Schwab faces in the near term would be a crackdown on payment for order flow. Schwab investors should pay close attention to Thursday’s Congressional hearing on the recent trading volatility in GameStop Corp. GME that will include testimony from the CEOs of Reddit, Robinhood, Citadel Securities and Melvin Capital.

(Photo: Charles Schwab)