Why We Believe Charles Schwab’s Shares Are Worth $55

by Trefis Team
Charles Schwab
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Charles Schwab (NYSE:SCHW) has seen impressive growth in recent years. The brokerage’s revenue saw 15% growth and its stock price jumped over 30% in 2017. The company’s continued efforts in innovating financial products and providing its customers with effective financial advisory services should continue to drive asset management fees. An already large asset base and the expectation of further interest rate hikes should drive interest earning revenues. Improvement in U.S. macro conditions should drive trading volumes and trading commissions, despite fee cuts in response to intense competition.

Our price estimate for Charles Schwab’s stock stands at $55, which is above the market price. We have also created an interactive dashboard which shows the forecast trends; you can modify the key value drivers to see how they impact the company’s revenues, bottom line and valuation.

  • Innovative financial products and effective advisory should drive Asset Management Fees

  • Fed’s rate hikes should drive interest-earning assets and revenue

  • Stiff competition from competing brokerages should lead to declines in revenue per trade, while improvement in macro conditions should drive trading volumes growth and commissions

  • Revenues are expected to increase 20% driven by financial advisory, rate hikes and recovery in volumes

  • Greater revenues should drive margins; recent tax overhaul should drive net income

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