Charles Schwab's Crypto Plans Add Fuel To Post-Earnings Rally
The robust performance has prompted leading Wall Street analysts, including those from JP Morgan and Goldman Sachs, to re-rate the stock and raise their price forecasts, citing strong fundamentals, increased trading activity, and strategic growth initiatives, including the upcoming launch of Bitcoin and Ethereum trading services.
On Friday, Charles Schwab reported second-quarter adjusted earnings per share of $1.14, exceeding the analyst consensus estimate of $1.07. Quarterly sales reached $5.851 billion, a 25% year-over-year (Y/Y) increase, outpacing the Street's projection of $5.651 billion.The company concluded the second quarter with $32.2 billion in cash and equivalents, while deposits stood at $233.1 billion, an 8% year-over-year decrease.
JP Morgan's Perspective
JP Morgan analyst Kenneth B. Worthington maintained an Overweight rating on Charles Schwab, raising his price forecast from $100 to $117.
Worthington highlighted Schwab's strong second-quarter performance, driven by better-than-expected net interest income (NII) and elevated trading activity amidst market volatility.
He noted that Schwab reported $5.9 billion in net revenue and a 50.1% adjusted pre-tax margin, exceeding projections. Trading revenue reached $952 million, an increase from both the previous quarter and year, with daily average trades climbing to 7.6 million. Worthington attributed NII tailwinds to reduced short-term debt and increased securities lending.
The analyst also viewed Schwab's $80 billion in net new assets (NNA) as solid, pointing to an encouraging 4.9% annualized growth rate exiting the quarter. Contributions from legacy Ameritrade clients notably improved, with NNA from that segment more than doubling year over year.
Despite a slight quarter-over-quarter dip in interest-earning assets, Worthington anticipates growth will resume in the second half of 2025 as Schwab continues to reduce bank supplemental funding. He observed that client transactional sweep cash increased to $412 billion in June, signaling stable client engagement.
Worthington welcomed Schwab's updated 2025 outlook, which raised revenue growth to 19% and projected $2.60 in adjusted EPS, while acknowledging that anticipated Fed rate cuts may pressure net interest margins. Nevertheless, he noted that the business momentum and financial flexibility position Schwab favorably for 2026, even as shares approach all-time highs. For fiscal 2025, Worthington projected net revenue of $23.5 billion and adjusted EPS of $4.62.
Goldman Sachs' Perspective
Goldman Sachs analyst Alexander Blostein reiterated a Buy rating on Charles Schwab, increasing his price forecast from $103 to $110. Blostein raised his 2025-2027 EPS estimates for Schwab to $4.69, $5.30, and $6.52, respectively, citing stronger-than-expected NII and disciplined expense management that drove operating margin upside. His updated projections now average approximately 4% above the Visible Alpha consensus.
Despite Schwab's 30% year-to-date stock outperformance, Blostein noted further upside potential. He highlighted accelerating EPS growth supported by multiple factors: growing transactional cash balances, reduced supplemental borrowing, and renewed balance sheet expansion by the fourth quarter of 2025. The analyst also emphasized Schwab's recent interest rate hedging efforts, which have decreased the firm's sensitivity to declining short-term rates.
He noted that new product rollouts, such as a crypto trading platform and expanded alternatives offerings, also factored into the positive outlook. Blostein pointed out that these initiatives and the ongoing integration of legacy Ameritrade clients are expected to boost organic NNA growth into the company's long-term 5-7% target range.
Following second-quarter's 4.9% annualized core organic growth rate in June, the analyst expressed confidence in Schwab's ability to maintain this trajectory. He also raised the full-year 2025 NII estimates, factoring in June's $412 billion transactional cash and continued funding paydowns.
Looking ahead, Blostein expects Schwab's net interest margin (NIM) to expand meaningfully, modeling 270 bps in 2025, 283 bps in 2026, and 306 bps in 2027. The analyst noted Schwab is well-positioned to benefit from securities reinvestment and a growing PAL loan portfolio, which rose 41% Y/Y.
Additionally, Blostein noted capital return as another key catalyst. With Schwab increasing its Tier 1 leverage ratio to 7.2% and repurchasing $350 million in stock in June, the analyst expects buybacks to accelerate as earnings grow and accumulated other comprehensive income (AOCI) improves.
Overall, he maintained a bullish view, projecting Schwab to deliver a 25% EPS CAGR through 2027 and pointing to the firm's solid fundamentals, expanding offerings, and improving capital flexibility as strong long-term investment drivers.
Blostein projected fiscal 2025 net revenue of $23.5 billion (prior $23.4 billion) and adjusted EPS of $4.69 (prior $4.61).
SCHW Price Action: Charles Schwab shares were trading higher by 1.08% to $96.84 at the time of publication Monday.
Image via Shutterstock
Latest Ratings for SCHW
Date
Firm
Action
From
To
Feb 2022
Morgan Stanley
Maintains
Overweight
Jan 2022
Deutsche Bank
Maintains
Buy
Jan 2022
Argus Research
Maintains
Buy
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