Spin-offs and divesting can be valuable tools for stocks, but a Charles Schwab (NYSE:SCHW) without its banking business? Some are suggesting that may be just the thing to do. The note came down from JPMorgan analyst Kenneth Worthington and his team.
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While it would certainly hurt the short term, in the long run, it could potentially produce a “meaningfully higher” multiple. However, even Worthington realizes that this isn’t likely to happen. That short-term pain he and his team mentioned would actually be too great a hit to earnings.
Indeed, CEO Walt Bettinger, in a discussion with CNBC, noted that Schwab considered de-banking once but dropped the notion quickly. It wasn’t “something that we’re going to look at in the short run,” Bettinger said. Even Worthington’s research notes that Schwab’s banking delivers substantial value to shareholders, which is even less incentive for Bettinger et al to throw it over. However, the key point for a de-banking effort would come from removing both bank regulation and cash sorting risks completely, which might make Schwab more attractive.
Bank or no bank, Charles Schwab stock still has Wall Street’s attention. Currently, SCHW is classified as a Moderate Buy by analyst consensus, with 11 Buy ratings against four Holds and two Sells. Furthermore, it offers 23.22% upside potential thanks to its average price target of $66.12.
