Anticipating Charles Schwab's Recovery: JMP Securities Upgrades SCHW Amid Projected Revenue Growth

JMP Securities analyst Devin Ryan upgraded Charles Schwab Corp SCHW to Market Outperform from Market Perform at a price target of $73. 

The analyst sees stabilization in cash sorting in the retail brokerage and wealth management category over the last quarter and expects it to provide some relief in valuation.

Ryan expects challenging Q2 operating results in Financial Services and FinTech industry, with pressured capital markets activity and trading volumes throughout H1 2023. 

The analyst expects activity in H2 2023 to accelerate from H1 2023, gradually improving in 2024 in the investment banking business in the overall market.

Ryan notes SCHW's new Q2 guidance reflects weak performance and thinks the market is now 'better positioned from an earnings perspective with downward revisions.' 

Last month, the company projected a Q2 revenue decline of 10%–11%, owing to the temporarily compressed NIM, a smaller interest-earning asset base, and weakness in trading activity.

For Q2 2023, the analyst revised the estimate for EPS to $0.69 from $0.79 (vs. consensus: $0.73) and revenue to $4.57 billion (from $4.82 billion vs. consensus: $4.66 billion). 

Ryan revised the estimate for EPS to $3.20 (from $3.45 vs. consensus of $3.18) for 2023.

For 2024, the analyst now estimates EPS of $3.80 (from $3.90 vs. consensus of $4.08) and revenue of $22.0 billion (from $22.3 billion vs consensus of $21.8 billion). 

Price Action: SCHW shares are trading higher by 0.97% at $57.34 on the last check Monday.