Morgan Stanley maintained an equal weight rating and a steady price target of $68.00 on Charles Schwab (NYSE:) on Tuesday. The company highlighted a significant increase in its bulk deposits, which saw a 4.7% month-on-month increase of $17 billion in September after several months of continuous withdrawals.
The observation of this increase in deposits raises questions regarding its sustainability. Despite potential concerns that these deposits could be reinvested in October, Morgan Stanley said Charles Schwab’s fourth-quarter earnings per share (EPS) outlook has improved. pointed out. Additionally, the company confirmed that the brokerage’s net interest margin (NIM) reduction guidance for 2025 and expense outlook for the same year are in line with expectations.
The Morgan Stanley analysis comes after a period in which Charles Schwab experienced sustained capital outflows. The recent reversal in capital inflows in September indicates a notable change in the company’s deposit trends.
The future performance of financial services companies is being closely watched, especially whether the recent increase in deposits is a temporary phenomenon or part of a long-term trend. Morgan Stanley’s comments suggest a cautious approach to Charles Schwab’s outlook for deposit sustainability and financial projections.
Morgan Stanley’s current rating reflects the company’s current position on Charles Schwab stock and does not imply an immediate change to its rating or price target. The investment firm’s reiteration of its stance comes as investors and market watchers consider a variety of factors that could affect Charles Schwab’s financial trajectory in the near term.
In other recent news, Charles Schwab Corporation posted strong third-quarter results, with better-than-expected earnings per share (EPS) of $0.77 and beating analyst consensus estimates of $0.75. This strong performance was driven by strong revenue growth of 3.3% and adjusted pre-tax margin of 41.2%. Additionally, the company reported a significant increase in customer assets, reaching $9.74 trillion, and opened 324,000 new brokerage accounts.
Various analysts are adjusting their outlook on Schwab. JMP Securities raised the company’s price target to $84, citing strong third-quarter results. Jefferies maintained its Buy rating and lowered its price target to $73, while BofA Securities maintained its Underperform rating and lowered its price target to $63. Deutsche Bank, Morgan Stanley and Piper Sandler also adjusted their price targets for Schwab.
In management news, Schwab CEO Walt Bettinger will retire at the end of 2024, and President Rick Wurster will take over in 2025. This is part of a long-term succession plan aimed at maintaining stability and continuity for Schwab’s customers. Both employees and shareholders. These are among the latest developments in the ongoing saga of Charles Schwab Corporation.
Investment Pro Insights
To complement our analysis of Morgan Stanley, recent data from InvestingPro provides additional context on Charles Schwab’s financial health. The company’s market capitalization has reached $132.1 billion, reflecting its large presence in the financial services sector.
InvestingPro Tip highlights that Charles Schwab has maintained its dividend for 36 consecutive years, which may be of interest to income-oriented investors given the company’s long-term stability. yeah. This consistent dividend history is consistent with the recent positive trend in sweep deposits noted by Morgan Stanley.
Another related InvestingPro tip shows that 8 analysts have revised earnings upward for next period. This upward revision to earnings estimates correlates with Morgan Stanley’s improved outlook for the company’s fourth-quarter EPS.
Charles Schwab’s P/E ratio of 29.95 suggests that the company’s stock is trading at a high earnings multiple, which investors should consider considering the recent deposit growth and future earnings expectations discussed in the article. There is a need.
For readers interested in a more comprehensive analysis, InvestingPro offers 21 additional tips on Charles Schwab that dig deeper into the company’s financial health and market position.
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