Positive Outlook and Buying Opportunity

In a note written on the same day, Brian Bedell stated, “Tuesday’s sell-off provides even more attractive risk/reward. We would use the sell-off as a buying opportunity and reiterate our Buy rating.” Bedell has set a price target of $73 for Schwab shares, suggesting a potential upside of 29.3% from Tuesday’s close.

Potential Growth in Client Cash Levels

Despite the dip in share price, Bedell does not foresee significant changes to Schwab’s client cash withdrawal behavior, earnings profile, liquidity position, or capital levels. Bedell expects modest growth in client cash levels by 2024, with a further pickup in 2025.

Risks and Near-Term Focus

Bedell highlights client integration attrition from the legacy Ameritrade client base as the “most important” near-term focus and a risk to the buy rating. However, current attrition levels are in line with initial expectations.

Bedell states, “This attrition pace is reflected in our current forecasts, where we project SCHW’s client organic asset growth rate to be around 5% this year, compared to a more normalized annual pace of approximately 6% in 2024 and 2025. However, a significant worsening in the net new assets trend in the coming months could pose downside risk to the stock.”

— AsumeTech’s