Charles Schwab
Retail investing giant Charles Schwab beat the annual profit and revenue predictions since acquiring TD Ameritrade for $26 billion.
On January 19, 2021, Charles Schwab reported its adjusted earnings of 74 cents per share, beating an estimate of 71 cents per share. The revenue was expected at $4.018 billion; however, it topped with $4.18 billion.
The company said it now handles nearly 29.6 million brokerage accounts. Shares of Schwab were flat on January 19 after a slight rise following the opening price.
According to the company’s data, the total client assets managed by Schwab rose to a staggering $6.69 trillion at the end of the fiscal year, with an increase of 66%, accompanied by the TD Ameritrade assets.
Charles Schwab added a massive 15.77 million new clients in the fourth quarter. This also includes 14.5 million new brokerage accounts from the acquired TD Ameritrade. The reason for such a massive figure is market volatility and the Covid-19 pandemic, which created an opportunity for many investors to pour in their greenbacks.
The multinational company saw an enormous increase in the number of daily trades. In the last quarter of 2020, the biggest trading day of 2020 was November 9, when the company’s data show that daily trades rose from 5.8 million to 7.8 million. In addition to retail investing and the acquirement of TD Ameritrade, Schwab is also taking advantage of the higher interest rates.
Charles Schwab CEO Walt Bettinger said, “Producing record operating performance and closing the largest brokerage acquisition in history during the fourth quarter of 2020 was an extraordinary capstone to an extraordinary year.”
The massive client trading activity and the acquisition of TD Ameritrade increased the company’s revenue to about 88% despite commission-free trading, which the firm implemented at the end of 2019.
Lower than expected employee expenses also surged up the results for the San Francisco based company. Operational expenses of $2.271 billion were up 52% from the third quarter and 54% compared to the fourth quarter of 2019.
Since the last report of Schwab in October 2020, the share price is up by 60%. The price was fluctuating in the range of $37 and $40, but the stock is currently trading at $58.61, dropping from its recent high of $61.20 on January 12. It seems like the price is trailing below its resistance level of 60.02 formed in December 2019, despite crossing the 60-mark.
For the future, Schwab’s stock price depends on the yield, as it earns through clients spread, through which people can buy high yielding securities. The yearly forecast for the stock price has an average target of $67.00, with a high of $73.00 and a low of $53.00. Analysts suggest a buy signal for SCHW. Besides this, Charles Schwab has been the subject of eight research reports in the past 90 days, depicting a strong interest in the stock. Not only Charles Schwab but also all other major investment firms have seen a record high in the fiscal year 2020.
Technical Analysis
The technical analysis of SCHW suggests a neutral outlook leaning towards a bullish zone. The RSI on the daily chart is positive at 67.91 The price has a support level at $50.00, and resistance at $68.00 Currently the price is showing a mild consolidation and may resume the upside momentum. However, if the price closes below the $50.00 mark, the bullish bias will be considered void.
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Adnan Rehman
Market Analyst
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