Charles Schwab share price plunge creates a ‘compelling entry point’ – Citi

By Sam Boughedda 

Charles Schwab (NYSE:) shares tumbled again on Monday, down over 20% as markets reacted to the fallout from the SVB crash, but Citi analysts upgraded SCHW to Buy from Neutral in a note.

The analysts cut the firm’s price target on the stock to $75 from $83 per share but said the stock’s pullback creates a “compelling entry point.”

On Wednesday last week, Charles Schwab shares closed at $76.20, but they are now trading at around $47 per share after plunging following the SVB news.

“After a 23% decline over the last two trading days, we see a compelling risk/reward at current levels,” wrote the analysts. “We see near-term revenue/earnings headwinds from rising funding costs and continued client cash sorting, but we believe these are reflected in the current stock price.”

They added that while client cash sorting is a “pressure point” and they expect to see the magnitude at a higher level than prior cycles, they “do not see a material risk to deposits leaving SCHW given the composition of its deposit base and customer protections.”

“SCHW is trading at 15x/11x our 2023/2024 EPS, which represents a 30%+ discount to historical averages. We see current valuation levels as a compelling entry point given SCHW’s long-term track record of delivering healthy asset/revenue growth and opportunities for margin expansion in 2024/2025 given current investment level,” the analysts explained.