Interest Rate Optimism A Boon For Charles Schwab

Argus maintains its Buy rating and raised the price target on Charles Schwab Corp SCHW shares by $10 to $46 on optimism over financial deregulation and potential for a Fed rate hike.

“Optimism over the potential for financial deregulation under a Trump administration and faster growth in financial assets has resulted in greater valuation multiples being afforded financial services firms,” analyst Stephen Biggar wrote in a note.

Biggar expects Schwab to post above-peer-average growth, driven by its innovative products and continued market share gains. The company has challenged industry pricing standards with many low- or no-cost offerings, including its popular ETFs.

The analyst pointed out that Schwab has grown core net assets by more than $100 billion in each of the last four years and is on track for a fifth year of growth in 2016. Schwab is also successful in taking cost-conscious clients from other financial services providers.

Biggar also raised his 2016 EPS estimate to $1.30 from $1.28, and 2017 estimate to $1.58 from $1.50. The revised target price of $46 implies 29-times 2017 EPS estimate and reflects faster earnings growth expectations.

“We note that Schwab’s 2016/2017 growth rate is projected at 22 percent, or a P/E-growth ratio of 1.3,” Biggar added.

At last check, shares of Schwab were down 0.23 percent to $38.86.