Charles Schwab Has Rallied 30%, Now What?

SCHW: Charles Schwab logo
Charles Schwab

Charles Schwab’s stock (NYSE: SCHW) has rallied 30% over recent weeks (vs. about a 37% gain in the S&P 500) to its current level near $37, after falling to a low of $28 in late March as the rapid increase in the number of Covid-19 cases outside China spooked investors. But the stock remains 22% below the $47 peak it reached in mid-February, and we believe it can recover to the $43 level (15% upside) once fears surrounding the coronavirus outbreak subside. Our conclusion is based on our detailed comparison of Charles Schwab’s stock performance during the current crisis with that during the 2008 recession in an interactive dashboard analysis.

How Did Charles Schwab Stock Fare During The 2008 Downturn And What Does It Mean For The Stock This Time Around?

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We see SCHW stock declined from levels of around $20 in October 2007 (the pre-crisis peak) to roughly $11 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 42% of its value from its approximate pre-crisis peak. This marked a lower drop than the broader S&P, which fell by about 51%.

However, SCHW recovered strongly post the 2008 crisis to about $17 in early 2010 – rising by 50% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

In comparison, SCHW stock lost 40% of its value between the market peak on February 19 to the low on March 23, and has already recovered 30% since then. Keeping in mind the trajectory over 2009-10, this suggests a potential recovery to around $43 (15% upside) once economic conditions begin to show signs of improvement. This marks a partial recovery back to the $47 level SCHW stock was at before the coronavirus outbreak gained global momentum.

But When Can We Expect This Recovery In Charles Schwab Stock?

The rally across industries over recent weeks can primarily be attributed to the Fed stimulus which reduced investor concerns about the near-term survival of companies. The gradual lifting of lockdowns globally has also helped the demand for some non-essential goods recover. Over the coming weeks, we expect continued improvement in demand and subdued growth in the number of new Covid-19 cases in the U.S. to buoy market expectations. While Q2 results will be weak, investors will focus their attention on full year 2020 results – helping Charles Schwab stock trend higher over the latter half of the year. More information about Charles Schwab’s revenues forecast over FY 2020-21 is available in our interactive dashboard.

Although Charles Schwab has some upside potential, there might be a bigger opportunity when we compare the Intercontinental Exchange with Charles Schwab.


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