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Charles Schwab Corp. (SCHW)
:SCHW
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Charles Schwab
(NYSE:SCHW)73Outperform
Positive Factors
Client Engagement
Daily average trades increased by 7%, suggesting higher client engagement and trading activity.
Market Position
The acquisition of TD Ameritrade not only brought scale but also best-in-class trading capabilities to the platform, further consolidating its leading position.
Negative Factors
Asset Inflows
Net new asset inflows softened to 3.6%, which is below expectations and the seasonal strength seen in December.
Charles Schwab (SCHW) vs. S&P 500 (SPY)
Market Cap
$140.11B
Dividend Yield1.36%
Average Volume (3M)13.12M
Price to Earnings (P/E)25.1
Beta (1Y)1.30
Revenue Growth1.87%
EPS Growth17.63%
CountryUS
Employees32,100
SectorFinancial
Sector Strength93
IndustryCapital Markets
Share Statistics
EPS (TTM)2.99
Shares Outstanding1,813,567,600
10 Day Avg. Volume10,677,875
30 Day Avg. Volume13,119,562
Financial Highlights & Ratios
PEG Ratio1.43
Price to Book (P/B)N/A
Price to Sales (P/S)8.11
Price to Cash Flow (P/CF)-3.20
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$93.13Price Target Upside21.36% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering19
Charles Schwab Business Overview & Revenue Model
Company DescriptionFounded in 1986, The Charles Schwab Corp. is a savings and loan holding company, which provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. It primarily operates through two segments, Investor Services and Advisor Services. The company is based in San Francisco, California.
How the Company Makes MoneyCharles Schwab makes money through a diverse range of revenue streams. Primarily, the company generates income from commission fees on trades, although in recent years, it has shifted towards a more commission-free trading model for stocks, ETFs, and options to attract and retain customers. Schwab also earns revenue from asset management fees by providing investment advisory and wealth management services, charging fees based on a percentage of assets managed. Additionally, it generates interest income from its banking operations, including loan products and deposit accounts. Schwab's revenue is further supported by net interest revenue, which is derived from the spread between interest earned on client cash balances held in Schwab Bank and interest paid out to clients. Furthermore, the company's strategic acquisitions and partnerships, such as the integration of TD Ameritrade, have bolstered its market presence and expanded its client base, contributing to overall earnings.
Charles Schwab Financial Statement Overview
Summary
Charles Schwab demonstrates financial strength with solid profitability and cash generation. The company faces challenges in revenue growth and operational efficiency, as seen in the negative EBIT margin. The balance sheet is stable but relies heavily on liabilities, which could pose a risk if not managed diligently. The ability to generate cash remains a key strength, supporting future investments and debt servicing needs.Income Statement
Charles Schwab's financial performance shows mixed results. The TTM (Trailing-Twelve-Months) data reveals a gross profit margin of 53.2%, indicating efficient cost management. However, the net profit margin stands at 33.8%, which is strong but slightly impacted by a negative EBIT margin of -0.9% due to operational challenges. Recent revenue has decreased compared to previous years, reflecting a contraction in revenue growth. The EBITDA margin remains healthy at 38.8%, suggesting good earnings before interest, taxes, depreciation, and amortization.65
Positive
Balance Sheet
The balance sheet shows Charles Schwab maintains a balanced financial structure with a debt-to-equity ratio of 0.88, indicating moderate leverage. The return on equity (ROE) is robust at 16.5%, showcasing effective utilization of shareholder funds. However, the equity ratio is relatively low at 8.4%, implying a higher reliance on liabilities to finance assets. This could be a potential risk if not managed carefully.70
Positive
Cash Flow
Cash flow analysis highlights strong cash generation with a free cash flow of $12.4 billion in the TTM. The free cash flow to net income ratio is 2.09, indicating an efficient conversion of earnings into cash. However, the operating cash flow to net income ratio of 2.15 suggests that operating cash flows are slightly reliant on changes in working capital. The free cash flow growth rate shows a decrease from the previous period, reflecting a contraction in cash flow growth.75
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 19.61B | 18.84B | 20.76B | 18.52B | 11.69B | Gross Profit |
| 19.61B | 18.84B | 17.59B | 16.28B | 10.12B | EBIT |
| 7.69B | 6.38B | 10.93B | 7.71B | 4.30B | EBITDA |
| 8.61B | 7.72B | 11.29B | 9.27B | 5.19B | Net Income Common Stockholders |
| 5.94B | 5.07B | 7.18B | 5.86B | 3.30B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 125.08B | 149.25B | 188.07B | 453.03B | 377.75B | Total Assets |
| 479.84B | 493.18B | 551.77B | 667.27B | 549.01B | Total Debt |
| 45.13B | 59.08B | 37.88B | 23.77B | 13.63B | Net Debt |
| 3.05B | 15.74B | -2.32B | -39.21B | -26.72B | Total Liabilities |
| 431.47B | 452.22B | 515.16B | 611.01B | 492.95B | Stockholders Equity |
| 48.38B | 40.96B | 36.61B | 56.26B | 56.06B |
| Cash Flow | Free Cash Flow | |||
| 2.05B | 18.89B | 1.09B | 1.20B | 6.22B | Operating Cash Flow |
| 2.67B | 19.59B | 2.06B | 2.12B | 6.85B | Investing Cash Flow |
| 35.43B | 57.41B | 32.05B | -75.66B | -125.85B | Financing Cash Flow |
| -47.06B | -61.24B | -68.72B | 96.32B | 143.98B |
Charles Schwab Technical Analysis
Neutral
76.74
Price Trends
78.17
Negative
77.00
Negative
72.21
Positive
Market Momentum
-0.66
Positive
40.56
Neutral
18.52
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SCHW, the sentiment is Neutral. The current price of 76.74 is below the 20-day moving average (MA) of 80.34, below the 50-day MA of 78.17, and above the 200-day MA of 72.21, indicating a neutral trend. The MACD of -0.66 indicates Positive momentum. The RSI at 40.56 is Neutral, neither overbought nor oversold. The STOCH value of 18.52 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for SCHW.
Charles Schwab Risk Analysis
Charles Schwab disclosed 22 risk factors in its most recent earnings report. Charles Schwab reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Charles Schwab Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
81 Outperform | $82.84B | 28.30 | 19.20% | 0.51% | 19.54% | 22.23% | |
79 Outperform | $29.55B | 14.08 | 18.20% | 1.28% | 13.79% | 28.57% | |
77 Outperform | $25.13B | 23.97 | 36.12% | 0.36% | 23.20% | 2.38% | |
77 Outperform | $196.32B | 15.32 | 13.16% | 2.98% | 9.17% | 53.77% | |
73 Outperform | $140.11B | 25.13 | 13.30% | 1.36% | 1.87% | 17.63% | |
71 Outperform | $1.06B | ― | 11.11% | ― | ― | ― | |
64 Neutral | $14.34B | 10.61 | 9.28% | 4.07% | 18.04% | -9.54% |
* Financial Sector Average
Performance Comparison
SCHW
Charles Schwab
76.74
9.59
14.28%
IBKR
Interactive Brokers
196.69
87.40
79.97%
LPLA
LPL Financial
345.08
79.64
30.00%
MS
Morgan Stanley
123.75
40.84
49.26%
RJF
Raymond James Financial
145.78
26.30
22.01%
AMTD
AMTD IDEA Group
1.02
-0.71
-41.04%
Charles Schwab Earnings Call Summary
Earnings Call Date: Jan 21, 2025 | % Change Since: 0.76% | Next Earnings Date: Apr 21, 2025
Earnings Call Sentiment Positive
The earnings call reflected a strong financial performance with significant growth in revenue and client engagement. Successful integration of Ameritrade and strategic investments in technology and client services were highlighted as key achievements. However, challenges in hitting retail growth targets and ongoing supplemental borrowing issues were noted as areas for improvement.Highlights
Strong Financial Performance
Revenue for Q4 2024 reached $5.3 billion, a year-over-year increase of 20%. Adjusted earnings per share increased nearly 50% on an adjusted basis versus Q4 2023.
Client Growth and Engagement
Net new assets growth up 20% for the year and 51% for the quarter. Total new brokerage accounts in 2024 were up 10% from the prior year. Record engagement with trading, coaching, and education.
Successful Integration of Ameritrade
Completed the largest brokerage conversion in the history of the industry, welcoming over 17 million Ameritrade client accounts and nearly $2 trillion in assets with less client attrition than forecasted.
Strategic Focus Areas
Investments in AI and technology to drive efficiency, expansion of financial consultant workforce, and enhancements in trading, wealth, and lending offers.
Lowlights
Retail Segment Growth Challenges
Retail net new assets (NNA) grew by over 50% versus the prior-year quarter but was only 3.5% for the year, below the long-term target range of 5% to 7%.
Supplemental Borrowing and Funding Challenges
Supplemental borrowing remains at $50 billion, though reduced by 50% from peak levels, indicating ongoing challenges in reducing high-cost funding.
Company Guidance
In the call, Schwab provided guidance with multiple key metrics highlighting their strong performance and future growth prospects. The company achieved a net new assets (NNA) growth of 20% for the year and 51% for the fourth quarter, while total new brokerage accounts increased by 10% from the prior year. Revenue grew by 4% annually and 20% over the fourth quarter of 2023, with adjusted earnings per share rising nearly 50% versus Q4. Schwab also noted record trading activity and engagement, with client promoter scores reaching all-time highs. Supplemental borrowing decreased to $50 billion, and capital ratios were aligned with targets. Looking forward, Schwab anticipates revenue growth of 13% to 15% in 2025, with plans to reduce bank supplemental funding further and expand their offerings, including crypto trading, when permissible. The company aims for a long-term organic growth rate of 5% to 7% and plans to enhance client relationships and expand their market presence through strategic investments.Charles Schwab Corporate Events
Executive/Board ChangesStock BuybackBusiness Operations and Strategy
Charles Schwab Sees Major Shareholder Exit After TD Stake Sale
Neutral
Feb 12, 2025
On February 12, 2025, TD Group US Holdings LLC, an affiliate of The Toronto-Dominion Bank, completed a secondary offering of 165,443,530 shares of Charles Schwab’s common stock, generating $13.1 billion in proceeds. This transaction, coupled with a $1.5 billion share repurchase by Charles Schwab, resulted in TD disposing of its entire stake in the company, leading to the termination of the TD stockholder agreement and the resignation of TD-appointed directors from Schwab’s board.
Private Placements and FinancingStock Buyback
Charles Schwab Announces Secondary Stock Offering
Neutral
Feb 10, 2025
On February 10, 2025, Charles Schwab announced a secondary offering of its common stock, where TD Group US Holdings LLC intends to exit its entire investment in the company. Concurrently, Charles Schwab has agreed to repurchase $1.5 billion of its nonvoting common stock from TD in a private transaction, contingent upon the offering’s completion. The repurchase, funded by cash on hand, is expected to impact the company’s Tier 1 Leverage Ratios slightly, and Charles Schwab intends to continue stock repurchases in alignment with financial objectives. TD, holding 10.1% economic ownership, will fully dispose of its shares, marking a significant shift in the company’s shareholder structure.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.