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 (SCHW) Rides on Strategic Buyouts, Expenses Rise
Read MoreHide Full Article
Driven by steepening of the yield curve, solid economic revival and opportunistic acquisitions over the past year, Charles Schwab (SCHW - Free Report) is likely to witness solid growth. However, steadily rising operating expenses and margin pressure remain concerns.
Over the past year, Schwab has been on an acquisition spree. The buyouts of TD Ameritrade, USAA’s Investment Management Company, Wasmer, Schroeder & Company, LLC and the acquisition of Motif’s technology and intellectual property are likely to further strengthen the company’s position in the brokerage industry and help diversify revenues. Driven by strong liquidity position, Schwab is well poised to expand through inorganic initiatives.
The company’s revenue growth is impressive. Schwab’s revenues witnessed a compounded annual growth rate (CAGR) of 11.8% over the last five years (ended 2020). These were mainly driven by the company’s efforts to enhance trading revenues, rise in advice solution revenues and acquisitions. Further, several initiatives including commission free-trading, reduction of fees for the Schwab market cap-weighted index mutual funds and launch of Schwab Stock Slices are expected to continue contributing to the company's market share.
However, like other brokerage firms such as Raymond James (RJF - Free Report) , Interactive Brokers (IBKR - Free Report) and LPL Financial (LPLA - Free Report) Schwab’s net interest margin is expected to remain under pressure in the quarters ahead. Also, with the Federal Reserve signaling no change in the interest rates anytime soon, a similar trend is expected to continue. Hence, margin contraction is likely to hurt top-line growth to some extent.
Further, mounting operating expenses remain a headwind for Schwab. Expenses witnessed a CAGR of 13.1% over the last five years (2016-2020), mainly due to rise in compensation and benefit costs, and acquisitions. Also, costs related to compensation and regulatory spending as well as strategic buyouts to drive operating efficiency are expected to keep expenses high in the upcoming quarters.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Image: Bigstock
Schwab (SCHW) Rides on Strategic Buyouts, Expenses Rise
Driven by steepening of the yield curve, solid economic revival and opportunistic acquisitions over the past year, Charles Schwab (SCHW - Free Report) is likely to witness solid growth. However, steadily rising operating expenses and margin pressure remain concerns.
Over the past year, Schwab has been on an acquisition spree. The buyouts of TD Ameritrade, USAA’s Investment Management Company, Wasmer, Schroeder & Company, LLC and the acquisition of Motif’s technology and intellectual property are likely to further strengthen the company’s position in the brokerage industry and help diversify revenues. Driven by strong liquidity position, Schwab is well poised to expand through inorganic initiatives.
The company’s revenue growth is impressive. Schwab’s revenues witnessed a compounded annual growth rate (CAGR) of 11.8% over the last five years (ended 2020). These were mainly driven by the company’s efforts to enhance trading revenues, rise in advice solution revenues and acquisitions. Further, several initiatives including commission free-trading, reduction of fees for the Schwab market cap-weighted index mutual funds and launch of Schwab Stock Slices are expected to continue contributing to the company's market share.
However, like other brokerage firms such as Raymond James (RJF - Free Report) , Interactive Brokers (IBKR - Free Report) and LPL Financial (LPLA - Free Report) Schwab’s net interest margin is expected to remain under pressure in the quarters ahead. Also, with the Federal Reserve signaling no change in the interest rates anytime soon, a similar trend is expected to continue. Hence, margin contraction is likely to hurt top-line growth to some extent.
Further, mounting operating expenses remain a headwind for Schwab. Expenses witnessed a CAGR of 13.1% over the last five years (2016-2020), mainly due to rise in compensation and benefit costs, and acquisitions. Also, costs related to compensation and regulatory spending as well as strategic buyouts to drive operating efficiency are expected to keep expenses high in the upcoming quarters.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>