Charles Schwab Corporation shares (SCHW) are trading more than a point higher in Thursday’s session after the brokerage giant topped its third quarter 2020 earnings estimates by $ 0.04 and reported inline earnings. Even so, revenue declined 9.7% year over year to $ 2.45 billion, indicating poor investment income and earnings Market share Losses for a new generation of Broker-dealer respond to the needs of younger investors. Results were also undermined by the recently completed acquisition of TD Ameritrade.
The company only completed the acquisition of TD Ameritrade two weeks ago, reducing the number of top US broker-dealers. Upstarts like Robinhood, Wealthfront and Betterment, however, spark the imagination and paperbacks of younger population groups and mark a paradigm shift that could last for generations. Charles Schwab apparently saw the “writing on the wall” in October 2019, which sent shock waves through the industry as it cut trading commissions to zero.
Peter Crawford, CFO of Schwab, noted that the new accounts and net worth in August are “some of the highest we have seen in a month of summer” in recent years. Interest rate compression, however, weighed on earnings, while Schwab’s mortgage portfolio suffered from above-expected prepayments. Credit Suisse analysts recognized this headwind and the effects of the so-called “Robinhood traders” on Wednesday and gained 13% by 2022 Earnings per share (EPS) appreciates the acquisition, but retains a “neutral” rating.
The consensus on Wall Street is in line with Credit Suisse’s growing caution with a combined “hold” rating based on just one “buy”, seven “hold” and no “sell” recommendations. Price targets Currently, they range from a low of $ 37 to a street high of $ 51, while the stock is just a dollar above the low on Thursday morning. This modest placement underscores the low expectations for Charles Schwab’s performance in the first half of 2021.
Charles Schwab long-term diagram (2000-2020)
Charles Schwab’s stock hit a high of $ 51.69 in 1999 after a multi-year uptrend, marking a high that was unquestioned for the next 17 years. It sold single digits in the first quarter of 2003 and got higher, making up about half of the 2008 bear market losses. The stock did not rebound much from bottoming in 2009 and returned a second test that ended at six. Year low in 2011. Strong buyers then stepped in, generating a surge that increased in 2008 resistance in 2014.
The price action completed a 100% retracement to the 1999 high in 2018, triggering a breakout just above $ 60, followed by a failure that added resistance in the low-50s. The stock has hit a number of lower highs and lows since then, breaking 50 months exponential moving average (EMA) support in March 2020. An attempt to return to this level in June has failed and is trading about two points below the barrier on Thursday. This is not a good sign of higher year-end prices.
The bottom line
Charles Schwab stock has entered a secular downtrend despite record-breaking account growth, with multiple headwinds weighing on earnings.
Disclosure: The author has family accounts with Charles Schwab but did not hold any stock positions at the time of publication.