The recent dip in Charles Schwab shares provides a promising entry point for investors, according to Deutsche Bank. The brokerage firm’s shares lost about 5% Tuesday on news the company sold more than $2 billion in debt. While this news likely rekindled worries about Schwab’s client cash sorting, liquidity and capital levels, Deutsche analyst Brian Bedell thinks these concerns are “overblown.” “Tuesday[‘s] Sell-off Provides Even More Attractive Risk/Reward,” Bedell said in a note written on the same day. “We would use the sell off as a buying opportunity and reiterate our Buy rating.” Bedell has a price target of $73 on shares, which implies 29.3% upside from Tuesday’s close. Shares of Schwab are down more than 32% year to date. He said it does not see any significant changes to Schwab’s client cash withdrawal behavior, the company’s earnings profile, liquidity position or capital levels. The analyst added expects client cash levels to modestly grow in 2024 and pick up in 2025. To be sure, Bedell said client integration attrition from the legacy Ameritrade client base being converted into Schwab’s platform remains the “most important” near-term focus, and a risk to its buy rating. As of now, attrition levels are tracking approximately in-line with initial expectations, Bedell said. “This attrition pace is reflected in our current forecasts in which we model SCHW’s client organic asset growth rate to be ~5% this year, vs. a more normalized ~6% annual pace (forecast for 2024 & 2025). This said, any substantial worsening in the NNA trend in coming months could pose downside risk to the stock.” —CNBC’s Michael Bloom contributed to this report.
