Charles Schwab Analyst 'Cautiously Optimistic' Upward Trend Can Continue In Q4

Charles Schwab Corporation SCHW reported better-than-expected third-quarter results on Tuesday and analysts are weighing in. 

The Details: Charles Schwab saw revenue rise 5% to $4.85 billion with clients' daily average trades growing 9% year-over-year.

JPMorgan analyst Kenneth Worthington pointed to Schwab as a leading brand for retail financial services and ​said its large and engaged base of retail investors should continue to drive growth for the company. JP Morgan maintained its Overweight rating on Schwab shares and raised its price target from $86 to $87. 

Cash Sweep Balances: Worthington noted Schwab's September transactional cash sweep balances experienced a large uptick and expects average earning assets and average transaction-based cash levels likely to be flat to higher in the fourth quarter. 

Piper Sandler analysts also highlighted Schwab's $17.2 billion increase in transactional cash balances in September as the highest month-over-month increase since the Fed began hiking rates in early 2022.

Piper Sandler's Patrick Moley maintained a Neutral rating on the stock, but raised the price target from $64 to $65 as he remains "cautiously optimistic this trend can directionally continue in the coming quarters."

See Also: Amazon Analyst Expects Q3 Earnings With Revenue Growth, Margin Expansion, Relative Stable E-Commerce Demand

Goldman Sachs analyst Alexander Blostein was less optimistic and sees cash sweep balances declining in October.  Blostein sees Schwab's potential downside risks to include faster-than-expected core deposit outflows, Ameritrade-related attrition and lower retail trading activity. Goldman Sachs maintained a Neutral rating, but raised the price target on Charles Schwab stock from $67 to $74. 

"Although October sweep balances are likely to decline, we are encouraged by signs of further stabilization in sweep deposits which should be well-received by investors," Blostein wrote. 

JMP Securities analyst Devin Ryan cautioned that client transactional cash trends "can be lumpy from month to month." However, Charles Schwab's latest results are evidence of "stabilizing-to-inflecting cash trends." That’s a key focus for investors.

JMP Securities maintained a Market Outperform rating on Charles Schwab and raised the price target from $82 to $84.

Price Action: According to Benzinga Pro, Charles Schwab shares are up 0.96% at $72.65 at the time of publication Wednesday.

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