Charles Schwab SCHW shares have declined 9.7% over the past month, mirroring broader market challenges. During the same period, the S&P 500 Index fell 6% due to a mix of economic and policy-related concerns. Its close peers – LPL Financial LPLA and Interactive Brokers IBKR – have also lost value in the same time frame.

Key factors behind the sell-off include escalating trade tensions, newly imposed tariffs on Canada, Mexico and China, and retaliatory measures from these nations. Additionally, uncertainty surrounding the Federal Reserve’s monetary policy stance and the broader economic impact of tariffs have fueled bearish investor sentiment.

One-Month Price Performance
 

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So, can this be a compelling opportunity to invest in SCHW stock? Let’s take a closer look.

Last year, following a subdued second-quarter performance, Schwab announced its intention to rely more on off-balance sheet arrangements to house deposits. In sync with this, the company focused on repaying high-cost bank supplemental funding balances. By 2024-end, the bank’s supplemental funding balance was down 49% to $49.9 billion from the peak of $97.1 billion recorded in May 2023. Driven by the efforts, the company’s net interest margin (NIM) rose to 2.12% in 2024 from 1.98% in 2023 and 1.78% in 2022. Now, the company expects 2025 NIM to be in the range of 2.55-2.65% as the funding costs come down on the back of the reduction of bank supplement funding.

Also, Schwab continues to benefit from aggressive efforts to increase its client base in advisory solutions. The buyouts of TD Ameritrade, USAA’s Investment Management Company, Wasmer, Schroeder & Company LLC and Motif’s technology and intellectual property have strengthened the company’s position. Despite the company lowering fees on certain investing solution products, revenues from the same increased as average client asset balances improved. The company’s total managed investing solutions revenues witnessed a compound annual growth rate (CAGR) of 12.2% over the last five years (ended 2024). Similarly, its total client assets recorded a CAGR of 20.1% in the same frame, mainly driven by the acquisitions completed during this period and market appreciation. 

Further, Schwab’s trading revenues are expected to improve in the near term. Though trading revenues recorded a negative three-year CAGR of 7.7% (ended 2024), the metric grew in 2024. A robust increase in trading volume and client activity post-Presidential election results largely led to the rise. This year, too, we are witnessing a massive trading volume and higher client activity as the markets are reeling under ambiguity arising from the Trump administration’s stance on imposing tariffs on several nations.

Driven by such developments, SCHW’s revenues are likely to keep improving going forward. The company expects revenues to grow 13-15% based on the assumptions of the Fed Fund rates at 4.25% by 2025-end, equity markets appreciating roughly 6.5% and client activity remaining robust.

Schwab’s Sales Estimates
 

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As of Dec. 31, 2024, Schwab had cash and cash equivalents of $42.1 billion and total debt of $45.1 billion. The company remains focused on maintaining a low-cost capital structure, which has been able to support its capital distributions. In January 2025, it announced an 8% hike in quarterly dividend to 27 cents per share. In the past five years, the company raised dividend payouts four times. In the same time frame, IBKR and LPLA increased their dividend only once.

Though the company has a share repurchase program in place, it will be opportunistic in buying back shares. As of Feb. 12, 2025, nearly $7.2 billion worth of authorization remained available after the repurchase of $1.5 billion non-voting shares from TD Group US Holdings LLC. The company targets a common dividend payout ratio of 20-30% of GAAP earnings.

Bullish Analyst Sentiments for SCHW

Earnings estimates for SCHW have moved upward for 2025 and 2026 in the past month. The positive estimate revision depicts bullish sentiments for the stock.

Schwab’s Earnings Estimate Trend
 

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Driven by upward estimate revision, the estimate for 2025 indicates year-over-year growth of 29.5%, and the same for 2026 suggests a 23.5% jump. Schwab has a long-term earnings per share growth rate of 19.3%.

Management projects 2025 earnings per share to be between $4.10 and $4.20. In 2024, adjusted earnings were $3.25 per share.

SCHW Earnings Estimates
 

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Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

Schwab Shares: To Buy or Not to Buy

The steps being undertaken by Schwab to drive NIM expansion, growth in client assets, higher investing solution revenues and trading income, and robust liquidity reflect solid prospects. Also, with strong earnings projections, the company is well-poised to deliver sustained growth. Hence, we believe the Schwab stock is an ideal candidate for investors' portfolio.

At present, SCHW carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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