We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Schwab Aims at Growing Trading Income, Higher Costs a Woe
Read MoreHide Full Article
On Jun 13, we issued an updated research report on The Charles Schwab Corporation (SCHW - Free Report) . Its efforts to strengthen trading income should support profitability in the long run, despite chances of near-term revenue reductions. Mounting expenses remain a key concern.
Schwab is focused on augmenting trading revenues. In February, the company announced several initiatives including reducing its basic online equity and ETF trade commissions to attract potential clients. Basically this triggered a price war among the brokerage firms including TD Ameritrade Holding Corporation (AMTD - Free Report) , Fidelity Investments Inc. and E*TRADE Financial Corporation .
While these efforts are likely to lower revenues in the near-term, they are aimed at strengthening Schwab’s client base and competitive position in the market. Hence, these efforts will lead to a rise in trading income going forward.
Apart from this, management’s aggressive efforts to increase client base in advisory solutions have been fruitful. Advice solution revenues have been rising for the last several years. Also, the average client assets have been witnessing a rising trend. The uptrend is expected to persist in the future as well.
Driven by such initiatives, analysts are optimist about the prospects of the company. The Zacks Consensus Estimate for 2017 has increased 1.9% over the last 60 days. Also, this Zacks Rank #3 (Hold) stock has gained 6.5% so far this year as against 2% decline for the Zacks categorized Investment Brokerage industry.
However, continued rise in operating expenses remains a major concern for Schwab. Costs related to compensation and regulatory spending should keep overall expenses high in the upcoming quarters.
Also, significant dependence on fee-based revenue streams is a near-term woe for Schwab. This, along with lower degree of capital intensity compared to its peers makes us apprehensive.
Stock that Warrants a Look
A stock in the same industry worth considering is Raymond James Financial, Inc. (RJF - Free Report) . The company witnessed an upward earnings estimate revision of 1.4% for the current year, in the last seven days. So far this year, its shares have rallied 14.3%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
Image: Bigstock
Schwab Aims at Growing Trading Income, Higher Costs a Woe
On Jun 13, we issued an updated research report on The Charles Schwab Corporation (SCHW - Free Report) . Its efforts to strengthen trading income should support profitability in the long run, despite chances of near-term revenue reductions. Mounting expenses remain a key concern.
Schwab is focused on augmenting trading revenues. In February, the company announced several initiatives including reducing its basic online equity and ETF trade commissions to attract potential clients. Basically this triggered a price war among the brokerage firms including TD Ameritrade Holding Corporation (AMTD - Free Report) , Fidelity Investments Inc. and E*TRADE Financial Corporation .
While these efforts are likely to lower revenues in the near-term, they are aimed at strengthening Schwab’s client base and competitive position in the market. Hence, these efforts will lead to a rise in trading income going forward.
Apart from this, management’s aggressive efforts to increase client base in advisory solutions have been fruitful. Advice solution revenues have been rising for the last several years. Also, the average client assets have been witnessing a rising trend. The uptrend is expected to persist in the future as well.
Driven by such initiatives, analysts are optimist about the prospects of the company. The Zacks Consensus Estimate for 2017 has increased 1.9% over the last 60 days. Also, this Zacks Rank #3 (Hold) stock has gained 6.5% so far this year as against 2% decline for the Zacks categorized Investment Brokerage industry.
However, continued rise in operating expenses remains a major concern for Schwab. Costs related to compensation and regulatory spending should keep overall expenses high in the upcoming quarters.
Also, significant dependence on fee-based revenue streams is a near-term woe for Schwab. This, along with lower degree of capital intensity compared to its peers makes us apprehensive.
Stock that Warrants a Look
A stock in the same industry worth considering is Raymond James Financial, Inc. (RJF - Free Report) . The company witnessed an upward earnings estimate revision of 1.4% for the current year, in the last seven days. So far this year, its shares have rallied 14.3%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>