J.P. Morgan Comments On Charles Schwab Acquisition Of optionsXpress

In a report published by J.P. Morgan, Charles Schwab SCHW is to acquire optionsXpress. J.P. Morgan said that Schwab announced a definitive agreement to acquire optionsXpress (OXPS) for approximately $1B. “The deal looks OK at first glance; it's reported to be modestly accretive in the first year, brings some technology advancements, and gives Schwab access to the active investor base. We see the deal adding a faster growth business but with a more volatile revenue base, which implies multiple compression. We maintain estimates, and rate Schwab Overweight, seeing significant stock price upside for those who can hold until interest rates normalize. We maintain our estimates until we can get a better sense of proforma financials. Our 12/11 target remains $19.50. We continue to recommend Schwab with an Overweight rating as we see Schwab being able to maintain ~15% earnings growth despite its size, as it continues to add new capabilities and services.” Charles Schwab closed yesterday at $17.56.