Charles Schwab (SCHW) Cut to Sell at Zacks Investment Research

Charles Schwab (NYSE:SCHW) was downgraded by Zacks Investment Research from a “hold” rating to a “sell” rating in a report issued on Monday.

According to Zacks, “Schwab’s shares have slightly outperformed the industry in the past three months. The company has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. Earnings estimates have been going down ahead of the company's fourth quarter 2018 results. While the company remains well positioned to gain from the rising rate environment, its initiatives to strengthen trading income and strong balance sheet position, continuous rise in expenses remains a major concern and might hurt bottom-line growth. Also, the company's significant dependence on fee-based revenue streams makes us apprehensive.”

A number of other analysts have also recently commented on SCHW. Morgan Stanley reduced their target price on shares of Charles Schwab from $60.00 to $55.00 and set an “overweight” rating for the company in a report on Friday, January 4th. Wolfe Research raised shares of Charles Schwab from an “underperform” rating to a “market perform” rating in a report on Tuesday, January 8th. Citigroup raised shares of Charles Schwab from a “sell” rating to a “neutral” rating and set a $44.08 target price for the company in a report on Sunday, December 2nd. Raymond James raised shares of Charles Schwab from a “market perform” rating to an “outperform” rating and set a $54.00 target price for the company in a report on Tuesday, October 30th. They noted that the move was a valuation call. Finally, Wells Fargo & Co reduced their target price on shares of Charles Schwab from $53.00 to $44.00 and set a “market perform” rating for the company in a report on Friday, January 4th. One equities research analyst has rated the stock with a sell rating, eight have issued a hold rating and ten have assigned a buy rating to the stock. Charles Schwab currently has a consensus rating of “Hold” and an average price target of $54.87.

SCHW stock traded down $0.02 during midday trading on Monday, reaching $43.80. 305,142 shares of the company’s stock traded hands, compared to its average volume of 6,755,887. Charles Schwab has a 52-week low of $37.83 and a 52-week high of $60.22. The stock has a market cap of $59.19 billion, a P/E ratio of 26.67, a P/E/G ratio of 0.96 and a beta of 1.35. The company has a current ratio of 0.29, a quick ratio of 0.29 and a debt-to-equity ratio of 0.32.

Charles Schwab (NYSE:SCHW) last announced its earnings results on Monday, October 15th. The financial services provider reported $0.65 EPS for the quarter, meeting the Zacks’ consensus estimate of $0.65. Charles Schwab had a net margin of 32.65% and a return on equity of 19.02%. The business had revenue of $2.58 billion during the quarter, compared to analysts’ expectations of $2.58 billion. During the same period in the prior year, the company earned $0.42 earnings per share. The firm’s revenue was up 19.1% on a year-over-year basis. As a group, equities analysts forecast that Charles Schwab will post 2.44 earnings per share for the current year.

Charles Schwab declared that its Board of Directors has initiated a stock buyback program on Thursday, October 25th that allows the company to buyback $1.00 billion in outstanding shares. This buyback authorization allows the financial services provider to repurchase up to 1.7% of its stock through open market purchases. Stock buyback programs are generally an indication that the company’s board of directors believes its shares are undervalued.

In other news, insider Marie A. Chandoha sold 8,424 shares of the firm’s stock in a transaction dated Tuesday, October 16th. The shares were sold at an average price of $48.01, for a total value of $404,436.24. The transaction was disclosed in a legal filing with the SEC, which can be accessed through this link. Also, insider Walter W. Bettinger purchased 124,669 shares of the stock in a transaction dated Wednesday, December 26th. The stock was purchased at an average price of $38.81 per share, for a total transaction of $4,838,403.89. Following the completion of the acquisition, the insider now directly owns 335,093 shares in the company, valued at approximately $13,004,959.33. The disclosure for this purchase can be found here. Over the last quarter, insiders have sold 408,737 shares of company stock worth $19,205,418. 11.50% of the stock is owned by company insiders.

Large investors have recently added to or reduced their stakes in the company. LFA Lugano Financial Advisors SA bought a new stake in shares of Charles Schwab in the 3rd quarter valued at about $111,000. Sapphire Star Partners LP acquired a new stake in Charles Schwab in the 3rd quarter worth approximately $123,000. Zions Bancorporation acquired a new stake in Charles Schwab in the 3rd quarter worth approximately $136,000. Lourd Capital LLC acquired a new stake in Charles Schwab in the 3rd quarter worth approximately $201,000. Finally, Homrich & Berg acquired a new stake in Charles Schwab in the 3rd quarter worth approximately $206,000. Institutional investors and hedge funds own 79.52% of the company’s stock.

Charles Schwab Company Profile

The Charles Schwab Corporation, through its subsidiaries, provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. The company operates through two segments, Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services, and other corporate brokerage services; equity compensation plan sponsors full-service recordkeeping for stock plans, stock options, restricted stock, performance shares, and stock appreciation rights; and retail investor, retirement plan, and mutual fund clearing services.

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