It was a tale of two halves for
Charles Schwab
stock in 2022. This year is looking a whole lot better.
Schwab (ticker: SCHW) finished last year off 1%. But there was a lot more action than that minuscule loss implies. The stock tumbled 29% through June 17, as investors fretted about higher rates pushing money out of Schwab’s deposit accounts and into higher-yielding money-market funds, before bouncing 38% over the rest of the year to finish roughly flat. There was sound. There was fury. It amounted to nothing.
This year has gotten off to a better start, with Schwab gaining 1.5%, to $84.54, during the first week of trading—and there’s a good chance those gains continue. Goldman Sachs analyst Alexander Blostein upgraded the stock to Buy from Neutral this past week. Deposit balances should reach their low point by the middle of 2023, he writes, and as that happens, the market will start looking ahead to better earnings. In all, Schwab should be able to grow earnings at 15% in 2023 and by 32% in 2024. Blostein has a 12-month price target of $98 on Schwab, up 16% from Friday’s close.
What’s more, Schwab is “better insulated from broader market and credit risk than its peer group,” according to UBS analyst Brennan Hawken in a December note explaining why it was one of the firm’s top picks for 2023. That’s because Schwab’s investment portfolio is made up largely of Treasuries and other securities that hold little credit risk. Hawken says the risk/reward ratio in Schwab’s shares is “bullishly skewed.”
The market sure seems to think so. This past Friday, the stock meaningfully broke above resistance that had been in place at just over $80 a share. Now it looks ready to take a run at $90 and then perhaps to a record high near $100.
Own your tomorrow, indeed.
Write to Ben Levisohn at Ben.Levisohn@barrons.com
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