Schwab’s Long-Term Uptrend Expected to Endure Despite Disappointing Q4
Stronger earnings and revenue growth seen ahead; maintaining our fair value estimate on Schwab stock of $87.
Michael Wong
Michael Wong, CFA, CPA, is director of equity research, financial services, North America, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. Michael previously served as chair of the valuation committee. Before assuming his current role in 2017, he was a senior equity analyst, covering investment banks and brokerages. Before joining Morningstar in 2008, he worked in corporate and public accounting.
Wong holds a bachelor’s degree in business administration, with concentrations in accounting, corporate finance, and financial services from San Francisco State University, where he graduated summa cum laude. He also holds the Chartered Financial Analyst® designation and is a Certified Public Accountant. Wong has also passed the Certified Financial Manager (CFM) and Certified Management Accountant (CMA) exams.
Wong won the “Technology Thought Leadership” award at the 2016 WealthManagement.com Industry Awards for his report, The Financial Services Observer: The U.S. Department of Labor’s Fiduciary Rule for Advisors Could Reshape the Financial Sector. In 2011, he ranked second in the Investment Services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. Wong was awarded the summer 2005 Johnson & Johnson Institute of Management Accountants CFM Gold Medal.
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In Financial Services Sector, Benefits of Higher Interest Rates Must Be Weighed Against Likely Slowing Economy
Key items to watch for include a slowdown in economic growth, normalization of credit costs, and a potential pivot by the Fed to a easier monetary policy.
Financials May Have Near-Term Pressure on Fee Revenue, but We Believe They Are Undervalued
Sector’s stocks are undervalued despite likely softening economy.
Over 70% of Financial Stocks Undervalued
But charge-offs and declining fee revenue should offset any benefits of rising interest rates.
Schwab’s Recent Quarter Wasn’t the Best
Despite results that disappointed the market, the company's underlying fundamentals and prospects for material earnings growth remain solid.
Higher Interest Rates Could Lift Financials Stocks
Credit services and asset management are undervalued.
We Plan to Increase Our Schwab Fair Value Estimate
We are incorporating higher interest-rate expectations into our model.
Financial Stocks Look Rich, but Macro Uncertainties Unlock Some Bargains
Concerns about inflation, monetary policy, and interest rates dinged performance during 2021's fourth quarter.
Will the SPAC Boom Benefit Investment Banks?
Two names are well-positioned to capitalize on potential SPAC opportunities.
Charles Schwab Reports Record Third-Quarter Net Income
Asset-related fees climbed while expenses remained well managed. We don’t anticipate a change to our fair value estimate.
Morgan Stanley’s Earnings Streak Continued in Q3
We don’t anticipate making a material change to our fair value estimate for the narrow-moat company.
Financial Earnings Strong, Most Stocks Fairly or Overvalued
Insurers should benefit from pricing increases.
Schwab Shows Signs of Modest Slowdown
Though it has a positive medium- and long-term growth trajectory.
Morgan Stanley Benefits From Acquisitions
It reported strong Q2 results and high capital returns.
Higher Inflation Could Benefit Financial-Services Companies
After recent runup in prices, the sector is about 10% overvalued.
Morgan Stanley Hits Record Despite $911M Archegos Loss
We don’t anticipate a material change to our $70 fair value estimate.
Schwab Benefits From High Trading Activity in Q1
We don't plan on making a change to the wide-moat company's fair value estimate.
Financials Stocks Should Handle Rising Interest Rates Better Than Other Sectors
Most of the sector is fairly valued.
Schwab's Winter Update Has Some Strategy Nuggets
We don’t plan on making a material change to our $51 fair value estimate for the wide-moat firm.
Morgan Stanley Reports Record Full-Year Net Revenue
The organic growth for the narrow-moat firm is dependent on market returns.
Client Asset Growth Leads to a Strong Finish for Schwab
We may increase our current $47 fair value estimate by up to 10%.
Financial Services: Outlook Improved but Still Overpriced
Most financial stocks are trading above our fair value estimates.
Near-Term Headwinds but Longer-Term Tailwinds for Schwab
We look for the bottom in net interest income and trading.
Nasdaq Boosts Growth Profile With Software Acquisition
Nasdaq recently announced the acquisition of Verafin, an anti-financial crime solutions provider, which will speed up its shift to more software-as-a-service revenue.
Recent Deals to Bolster Morgan Stanley’s Earnings
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Record Client Assets Offset Pressure at Schwab
We don't anticipate on changing our fair value estimate for the wide-moat company, and we assess the shares as undervalued.
What Eaton Vance Purchase Means for Morgan Stanley
We don't expect to change our fair value estimate for narrow-moat Morgan Stanley.
Banks Still Look Cheap
Some high-quality financial services firms are trading at decent discounts.
Goldman Sachs’ Financials Restated for 1MDB Charge
We don’t anticipate a change to our $218 fair value estimate.
E-Trade’s Revenue Boost Replaces Lost Interest Revenue
We don’t anticipate making a material change to our $49.50 fair value estimate for the narrow-moat company.
TD Ameritrade’s Transaction Revenue Is a Highlight
TD Ameritrade reported strong fiscal third-quarter results, as high trading volumes are offsetting a decline in interest rate-related revenue.
Schwab's Acquisitions Are Creating Long-Term Value
We think the shares are undervalued.
Be Careful with Financial Services Stocks Today
Banks are the most undervalued subsector.
Merger Approved, Schwab and TD Fair Values Increase
We consider both stocks to be fairly valued.
Schwab-TD Ameritrade Merger Can Create Value in Face of Low Rates
The combination will cement Schwab's position as one of the key players in the financial sector.
E-Trade Reports Good Quarter; Morgan Stanley Deal Nears
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Trading Volume to Partly Support TD Ameritrade Top Line
We don't anticipate making a material change to our fair value estimate and assess the shares as modestly undervalued.
Goldman Sachs' Business Model May Rebound Before Peers
Business Diversification Benefits Muted for Schwab
For this wide-moat firm, we don't anticipate making a material change to our fair value estimate and currently assess shares as modestly undervalued.
Financials Sector Flails as Coronavirus Sweeps Through
But Michael Wong offers a peek at the bright side.
Financial Services Is Undervalued Based on Long-Term Fundamentals
Berkshire an ideal defensive investment for the long term.
Morgan Stanley Undersells Synergies in E-Trade Deal
We don't at this time anticipate a material change in our fair value estimate for Morgan Stanley.
E-Trade Increases Expense Guidance After Investments
We don’t anticipate making a material change to our per share fair value estimate and assess shares as fairly valued.
Near-Term Goals Achievable for Morgan Stanley
We don’t anticipate making a material change to our fair value estimate, and we assess the shares as being fairly valued.
Schwab's Results Show Downward Pressure on Revenue
The wide-moat firm looks fairly valued.
Lingering Issues at Goldman Sachs Should Soon Resolve
Shares of the narrow-moat firm are fairly valued today.
Financial Services: Investors Have a Clearer Picture of Sector's Threats
Market overestimated likelihood of a recession; financial-services stocks trading at a premium to our fair values.
Schwab, TD Merger Should Be Positive for Valuations
We believe that Schwab's already strong business model will be enhanced by the merger with TD Ameritrade, and we expect to assign a wide moat to the combined entity.
What to Make of Schwab-TD Merger Talks
If a deal is announced, we anticipate multiple hurdles including a headline risk of antitrust, but we currently believe it's surmountable.
Online Brokers Worth a Look Amid Pricing Battle
We explain our latest views on Charles Schwab, TD Ameritrade, and E-Trade.