Why Charles Schwab Stock Slumped on Wednesday
Key Points
Tellingly, he left his buy recommendation intact.
His adjustment had more to do with short-term volatility than long-term factors.
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An analyst's price target cut ended up cutting the share price of Charles Schwab (NYSE: SCHW) on Wednesday. Although the reduction wasn't drastic and the pundit behind it actually increased some estimates, investors took this to heart and sold out of the financial stock. It closed the day down nearly 2% in value.
A bit of a haircut
The person behind this move was Truist Securities' David Smith. That morning, Smith shaved his Schwab price target to $120 per share from his previous $122. He maintained his buy recommendation on the shares as he did so.
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The analyst's adjustment was part of a broader analysis of financial sector titles. According to reports, he's now expecting short-term volatility in securities markets to roil client assets, but he's forecasting a recovery in the second half of the year.
And while he believes that the company will see lower revenue per trade on average through 2027, trading activity should be robust enough to mitigate this. On this basis, Smith raised both his full-year 2026 and 2027 earnings estimates; he now believes net income not under generally accepted accounting principles (GAAP) will be $5.95 per share in the former year and $7.30 in the latter.
Sprawl is good
Although the Iran war is putting pressure on many facets of the global economy, I feel Schwab -- with its wide palette of brokerage and other services -- is better insulated against economic shocks than many believe. I think it'll remain one of the most significant brokers on the scene, so anyone who thinks the markets will remain frothy should consider it a buy.
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Charles Schwab is an advertising partner of Motley Fool Money. Eric Volkman has positions in Charles Schwab. The Motley Fool has positions in and recommends Truist Financial. The Motley Fool recommends Charles Schwab and recommends the following options: short March 2026 $100 calls on Charles Schwab. The Motley Fool has a disclosure policy.
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