Charles Schwab Stock: Analysts See Room to Run After Strong Outperformance

Charles Schwab (SCHW), the Westlake, Texas-based financial services behemoth with a market capitalization nearing $185 billion, continues to command Wall Street's attention. The company, which provides a full suite of brokerage, banking, and advisory services, has delivered robust shareholder returns, notably outperforming major indices.

Over the past year, SCHW shares have surged approximately 24%, handily beating the S&P 500's ($SPX) 14% gain. This year-to-date, the stock is up 4%, continuing its lead over the broader market. Its strength is also evident against its sector peers, as tracked by the SPDR S&P Capital Markets ETF (KCE).

The company's fourth-quarter earnings report, released in late January, presented a mixed picture. While revenue of $6.3 billion slightly missed consensus estimates, adjusted earnings per share of $1.39 met expectations. More importantly, Schwab has built a reputation for reliability, having surpassed profit estimates in each of the last four quarters. Analysts project nearly 19% earnings growth for the full fiscal year.

"The revenue miss is a footnote in a much stronger narrative of execution and market share gains," said Michael Thorne, a portfolio manager at Horizon Capital Advisors. "Schwab is navigating the interest rate environment adeptly, and its scale in wealth management provides a durable revenue stream that the market is rewarding."

The analyst community reflects this tempered confidence. The current consensus rating stands at "Moderate Buy," based on 22 covering firms. Sentiment has improved from a month ago, with one previously bearish analyst dropping a "Strong Sell" rating. Notably, William Katz of TD Cowen recently reiterated a "Buy" with a $138 price target, suggesting over 30% upside from current levels. The mean price target is $121.26, with a street-high target of $148.

However, not all observers are convinced. "This is classic momentum-chasing," argued Lisa Chen, an independent market strategist known for her critical takes. "The stock has had a great run, but a premium valuation on a revenue miss? The analyst upgrades feel more like justification after the fact than forward-looking analysis. I see more risk than reward here."

David Miller, a veteran retail investor following the financial sector, offered a middle-ground perspective. "I've held Schwab for years because of their client-focused model. The quarterly noise doesn't change the long-term thesis. The analyst targets seem reasonable, but I'm not buying based solely on them. It's about the competitive moat."

Disclosure: The author had no positions in the mentioned securities at publication. This information is for educational purposes only and was adapted from source material published on Barchart.com.