© Reuters. Morgan Stanley cuts Charles Schwab (SCHW) on limited visibility, EPS risk
By Senad Karaahmetovic
Morgan Stanley analysts downgraded Charles Schwab (NYSE:) shares to Equal-Weight from Overweight with a $68 per share price target.
Still, the new price target offers a ~23% upside from current levels. The downgrade move comes despite a ~30% plunge in SCHW shares month-to-date (MTD).
“Rising rates have left SCHW with $22b of unrealized losses on the books, and the bears think it will have to sell securities at a loss to fund future withdrawals. While clients aren’t leaving and SCHW has other sources of liquidity, earnings face more pressure than we had expected,” analysts wrote in a note.
The lower price target reflects a 30% reduction in EPS estimates for this year and next due to “the latest trends in customer cash sorting and uncertainty around the rates outlook.” As a result, Morgan Stanley now sits 21%/26% below consensus in 2023/24, respectively.
“While we still see a major earnings recovery in 2025, the market is unlikely to look that far out,” the analysts concluded.
Charles Schwab shares trade 1.5% lower in pre-market Thursday.
