Charles Schwab (SCHW) has been bumping it’s head on the January ’23 high of $86 and change which this blog’s technician (Gary Morrow, @garysmorrow over on X), has been saying is (or was) formidable technical resistance.
The all-time-high on Schwab was $95.62 in the first week of January ’22. From there the stock sank to lows below $60 in mid-2022, and then ran up in late ’22 to that previously-mentioned mid-$80’s level in early ’23 before the market figured out there was not going to be any recession (and hence no fed funds rate reductions) and the stock traded all the way down to the mid-$40’s in mid-2023.
Here’s a look at Schwab’s total return versus the SP 500’s total return from January 1 ’22 May 14 ’25:
Schwab has given up 558 bp’s a year to the SP 500’s annual return the last 3 years, but that could be ready to change.
Fundamental analysis:
What struck me when updating SCHW’s valuation spreadsheet after the mid-April ’25 earnings report is the expected EPS growth for the next 3 years, the analyst community has assigned Schwab:
- ’25: 31% EPS growth and +15% revenue growth;
- ’26: 20% EPS growth and +10% revenue growth;
- ’27: 16% EPS growth and +8% revenue growth;
Looking at the estimates as of today (sourced from LSEG), the revenue estimates have been revised higher since mid-April ’25 or post the Q1 ’25 earnings release), while the EPS estimates are the exact same.
The stock – at $88 per share – is up $14 since the Q1 ’25 earnings release, trading at 21x EPS for expected 31% EPS growth. (Had to look at that twice, but the numbers are good.)
Schwab assets under management totaled $9.9 trillion as of March 31 ’25, second only to Blackrock I believe.
The one note from the earnings call that stuck was that Schwab management noted that legacy TDAM (TD Ameritrade) clients were returning to Schwab, showing Q1 ’25 organic growth of 2% – 3%. Schwab thinks there is a long runway to recover that business.
Not mentioned at all, or only by the Treasury Secretary, is easier capital rules that will eventually be passed by Congress for banks and brokers – Janie Dimon has really been beating the drum on this since January ’25 – which might allow Schwab to repurchase some stock and increase the dividend, which has been at $0.25 for the last 10 quarters.
Clients were long the stock in the late 1990’s, in the halcyon days of day trading and E-trade commercials, rode some of the stock through the decade from 2000 to 2009 (painfully), and then started accumulating Schwab again after the worst decade of stock returns since the 1930’s.
If Schwab takes out the $96 high, it’s likely going much higher, but it will benefit from an easier Fed and a favorable stock market in ’25, if they materialize.
None of this is advice or a recommendation, but only an opinion. Past performance is no guarantee of future results. None of this information may be updated and if updated, may not be done in a timely fashion. The EPS and revenue estimates of Schwab are sourced from LSEG.com.
Thanks for reading.