While the financial services industry as a whole is struggling right now – no thanks to the SVB run – there is a single company that is struggling more than others: Charles Schwab (SCHW). The stock has dropped another 12% in the past week and shows no signs of slowing down anytime soon.
CFO Peter Crawford issued a statement in hopes of quelling negative market sentiment surrounding the company. He claims that there is no cause for concern with Charles Schwab – the company has access to substantial liquidity. Moreover, Crawford expressed that the company is well-positioned to navigate the uncertain economic climate right now and in the near term.
Despite the $100b cash on hand and new assets coming on the horizon, it doesn’t appear investors are content. And this isn’t the only financial institution that’s struggling after SVB’s collapse. We talked earlier in the week about First Republic Bank’s road to recovery after losing as much as 68% in a single trading session. Charles Schwab felt these effects themselves, losing 23% in the same Monday trading session, which was the company’s biggest drop to date.
Back in January, we warned investors that this stock was headed for trouble. At the time, SCHW sat at $80/share but had just missed earnings and dropped nearly 4%. Today, the stock sits at just $57/share, but is already down an additional 3% today.
So, we’ll take another look at the company through the VectorVest stock analyzing software to show you what has changed over the past 45 days or so. Then, we’ll tell you what you should do next if you’re currently invested in SCHW or are looking to buy in at a value. If you missed our first warning, take heed of this one…
SCHW Still Has Excellent Upside Potential, But Safety and Timing Have Gotten Worse
The VectorVest system helps you eliminate costly human errors, emotion, and guesswork from your investing strategy by telling you what to buy, when to buy it, and when to sell it. The system has outperformed the S&P 500 for over 20 years now, and has called every major market move.
It’s all possible through a proprietary stock rating system. You’re given all the insights you need in just three simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). These each sit on their own scale of 0.00-2.00, with 1.00 being the average. Based on these ratings, VectorVest is able to provide you with a clear buy, sell, or hold recommendation for any given stock. We did it last time for SCHW, and we’ll do it again below:
- Excellent Upside Potential: The one thing SCHW has going for it right now is the fact that its upside potential is still excellent - as confirmed by the RV rating of 1.54. This rating compares a stock’s 3-year price appreciation potential to AAA corporate bond rates and risk. What’s more, the stock is undervalued as it stands - with a current value of $99/share.
- Fair Safety: Despite the fact that SCHW has fallen more than 28% in the past month, it’s still a fairly safe stock. With that said, the RS rating of 1.08 today is much lower than in January when it sat at 1.29. This rating is based on the company’s financial consistency and predictability, debt-to-equity ratio, and business longevity. However, the real problem for SCHW is timing…
- Poor Timing: When we last wrote about this stock, the RT rating was gravitating in the wrong direction, but sat just below the average at 0.94. Today, it’s fallen even further to just 0.67 - suggesting the negative price trend has really taken hold and strengthened. This rating is calculated based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
All things considered, the VST rating of 1.12 is still good for SCHW - but if you’ve been weathering the storm over the past few months you’re likely wondering if it’s time to cut losses. Or, is this the bottom - and is the stock poised to rebound sooner rather than later?
If you missed our last recommendation back in January, you have a chance to make up for it now - get a free stock analysis at VectorVest to determine your next move.
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VectorVest advocates buying safe, undervalued stocks, rising in price. As for SCHW, it is undervalued with excellent upside potential and fair safety - but the timing is poor, and it doesn’t appear that this trend is going to let up anytime soon.
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