Charles Schwab’s stock has fallen nearly 34% in March, and is now trading at its lowest level since 2020. The company’s shares are currently trading at around $50 per share, down from a high of over $90 per share in early 2022.
Charles Schwab Corp ($SCHW) is a leading provider of financial services in the US. The company offers a wide range of products and services, including brokerage, banking, and investment advice.
Bears:
Morgan Stanley has downgraded Charles Schwab’s stock from overweight to equal weight, citing concerns about client outflows and the potential for losses from rising interest rates.
The bank’s analyst, Michael Cyprys, said that Charles Schwab’s clients have been withdrawing cash at a rate of $20 billion per month, twice as fast as he expected. He also noted that the company has invested heavily in long-dated bonds, which are now losing value as interest rates rise. Cyprys said that he is “not confident” that the situation will improve in the near term, as the Federal Reserve is expected to continue raising interest rates. He added that the prospect of the Fed pausing or cutting rates “looks extremely controversial.”
The downgrade from Morgan Stanley is a sign of the growing concerns about the financial health of non-bank financial institutions. These companies, which include Charles Schwab, are facing a number of challenges, including rising interest rates, client outflows, and potential losses from their investments.
It remains to be seen how these companies will weather the current storm. However, the downgrade from Morgan Stanley is a reminder that even the most well-known and respected financial institutions are not immune to risk.
Bulls:
Despite these challenges, Schwab remains a well-run company with a strong track record. The company has a large and loyal customer base, and it is well-positioned to benefit from the long-term growth of the financial services industry.
Based on my analysis, I believe that Schwab’s stock is currently undervalued. The company is trading at a price-to-earnings ratio is way below its historical average. I believe that Schwab’s stock has the potential to rebound to its previous highs in the near future.
However, it is important to note that there are still risks to Schwab’s business. The company is facing increased competition and rising interest rates, which could continue to weigh on its stock price in the near term.
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