Charles Schwab Earnings: Despite Sequential Decline, We Still Believe in Medium-Term Growth Story

Charles Schwab's revenue and earnings took a step back in the second quarter of 2024, but we believe medium- to long-term trends that have been driving earnings, such as client asset growth and higher client cash-related revenue over time, are intact. The company reported net income to common shareholders of $1.2 billion, or $0.66 per diluted share, on $4.69 billion of net revenue. Net revenue declined 1% sequentially, as an increase in asset management revenue wasn't enough to offset a decline in client-cash related revenue and trading revenue. Second-quarter revenue was still higher than it has been the previous five quarters, where we've seen a stabilization to an uptrend in revenue. We don't anticipate making a material change to our $76 per share fair value estimate for wide-moat rated Charles Schwab, and assess the shares as being fairly valued to somewhat undervalued.