BofA Analyst Forecasts Slower Growth For Broker Stocks As Market Volatility Increases

BofA Securities analyst Craig Siegenthaler revised estimates and price forecasts for several broker stocks ahead of earnings season.

The analyst writes that a deeper equity market correction poses EPS risks from cash sweep revenues, trading/margin loans, and AUM-based fees.

Siegenthaler expects further NNA slowdowns, especially in higher ROCA retail channel vs. wealth manager, projecting a modest dip in March.

Since the correction happened late in the quarter, most risks will surface in the second quarter instead of the first quarter of 2025, adds the analyst.

Charles Schwab: The analyst projects Charles Schwab Corporation’s SCHW NII to keep rising, regardless of market or rates, as it pays down its costly FHLB/CD borrowings.

He sees a third consecutive quarter of net new asset growth, with a 4.7% estimate, near the low end of the company’s 5%-7% target.

The analyst reiterated the Underperform rating on the company and lowered the price forecast from $74 to $66.

Also, Siegenthaler revised EPS estimates for first-quarter FY25 to $1.03 (from $1.01), 2026 to $4.27 (from $4.82) and 2027 to $4.73 (from $5.26) due to the negative impact of a reduced interest rate forecast and lower AUM-based fees.

Meanwhile, the analyst maintains a long-term bullish stance on retail brokers, particularly online brokers like Interactive Brokers Group Inc. IBKR and Robinhood Markets Inc. HOOD, as their valuations and ownership setups have improved post-correction year-to-date.

Siegenthaler continues to view online brokerage as a global secular trend, benefiting from its high-tech, low-cost model, which reaches mass customers at low price points and capitalizes on the demographic shift to digital.

Overall, the analyst maintains the Buy rating on LPL Financial Holdings Inc LPLA, thanks to strong organic growth and stable ROCA.

Interactive Brokers Group: The analyst reduced the Interactive Brokers Group stock’s price forecast from $307 to $265.

Siegenthaler forecasts a 3% quarter-over-quarter revenue increase driven by higher trading volumes, with account growth expected to accelerate to 32%.

The analyst lowered first-quarter/2026/2027 EPS estimates to $1.99/$8.90/$10.62, from $2/$10.14/$12.27, respectively due to expectations of lower client engagement and the impact of lower short-term interest rates on net interest income.

Coinbase: Meanwhile, the analyst notes the strong trading levels Coinbase Global Inc. COIN in the fourth quarter of 2024 were tough to replicate in the first quarter of FY25, with a decline in crypto prices slowing client activity.

As a result, the analyst lowered Coinbase's 2026/27 EPS estimates by over 10% and reduced the price forecast from $311 to $217.

Robinhood Markets: The analyst lowered the stock price target from $65 to $58.

While Siegenthaler expects Robinhood’s revenues to rise 44% year-over-year, this still represents a 12% quarter-over-quarter decline due to lower trading.

At Robinhood, the analyst also anticipates higher expenses and a return to a normal 21% tax rate after previously being at 0% or lower since its 2021 listing.

The analyst revised the first-quarter FY25/2026/2027 EPS estimates to 29 cents/$1.49/$1.94, from 43 cents/$1.76/$2.18, respectively, due to a lower interest rate forecast, decelerating trading volumes, higher G&A expenses, and a return to a normal tax rate.

Meanwhile, the analyst remains optimistic about the company’s long-term growth, driven by business expansion, new product launches, strong client relationships, and market growth both globally (including Singapore) and domestically.

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