The Charles Schwab Corporation (NYSE:SCHW) stock fell 6.2% on Thursday after Bank of America double downgraded its rating from Buy to Sell. Following a decline on Wednesday after Q4 earnings, this was SCHW stock’s second straight day in the red zone.
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Bank of America analyst Craig Siegenthaler also reduced the target price from $92 to $75, which implies a downside of 1.7% from the current trading level.
Overall, the SCHW target price is $94.38, which is 23.7% higher than the current price level. Furthermore, Siegenthaler’s rating contradicts Wall Street’s Moderate Buy consensus rating. On TipRanks, the stock has a total of 14 recommendations, out of which 11 are Buy.
Based in the U.S., Charles Schwab is a financial company that offers banking, wealth management, brokerage, trading services, and more.
Siegenthaler believes client cash sorting (moving money from bank deposits to higher-yielding money market funds) will continue to be at higher levels in the first half of 2023. The company is also among the biggest beneficiaries of Fed’s interest rate hikes. He believes that this benefit will be phased out by the middle of 2023. This could be a big blow to the company as 60% of its revenues are linked to interest rates.
The analyst lowered the EPS estimate from $4.60 to $4.28 for Fiscal 2023 and from $5.25 to $5.0 for Fiscal 2024. Nonetheless, the Fed’s prolonged rate hikes until 2024 and the company’s long-term securities portfolio growth could be threats to Siegenthaler’s rating.
Siegenthaler is a five-star rated analyst on the Street and is a trusted name in rating financial stocks in the U.S. and U.K. markets.
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