Charles Schwab Gets Tech Savvy En Route To $16
Charles Schwab (NYSE:SCHW) has launched Schwab Advisor Center, an iPhone app to allow investment advisers to use Schwab Advisor Services on the go. [1] The app will provide fast access to clients’ account information including positions, transactions and balances along with real-time market data. This feature will be particularly useful in managing investments in the current volatile market conditions and will help Schwab attract customers.
See our complete analysis of Charles Schwab’s stock
The app is part of the company’s efforts to capitalize on the recent surge in mobile phone popularity. Apple’s (NASDAQ:AAPL) iPhone and Google’s (NASDAQ:GOOG) Android-based phones have been selling like hot cakes in the past few years. To ride this trend, Charles Schwab has taken several initiatives such as the Schwab Mobile Deposit, which allows customers to make transactions through their brokerage accounts by simply taking a picture of their checks through mobile phones. [2] The upcoming generation of investors has grown up through the technological revolution observed since the turn of the millennium and has shown increased propensity toward making sound investments early to secure their financial positions. (See Ameritrade Banks On Young Parents Driving Growth As Business Recovers) We believe that the company’s technology friendly drive will attract customers, particularly the young tech savvy investors.
Charles Schwab will look to build on the 9% year-on-year growth in Daily Average Revenue Trades (DARTs) that it reported in May this year. [3] Brokerages like E-Trade (NASDAQ:ETFC) and Ameritrade (NYSE:AMTD) will look for an increase in trade volumes to offset the burden of low interest rates, which are likely to persist for some time.
The Federal Open Market Committee has stated that short-term interest rates will likely be kept near zero at least till 2014, and the recent projections indicate that the rates will not rise till 2015. [4] This will have a major impact on Charles Schwab, which derives nearly half (46%) of its value from interests on deposits, loans and securities, according to our analysis.
Our price estimate for Schwab is $16, implying a 25% premium to the current market price. You can gauge the impact of a change in the forecasts on our price estimate by modifying the charts above.
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Notes:- Charles Schwab Corp : Schwab Launches Advisor App for the iPhone, 4-traders, 28th June, 2012 [↩]
- Schwab Mobile Deposit [↩]
- Schwab Reports Y/Y Jump in DARTs, Zacks Equity Research, 18th June, 2012 [↩]
- Forecasts Hint Fed Might Change Rate Guidance, Wall Street Journal, 26th June, 2012 [↩]