Schwab’s Revenue Growth Stalled in Q4; We Still Assess Long-Term Uptrend Will Endure

Charles Schwab’s net revenue was sequentially flat in the fourth quarter, but we believe the company’s revenue and earnings will still experience a substantial uptrend over the near and long term. The company reported net income to common shareholders of $1.8 billion, or $0.97 per diluted share, on $5.5 billion of net revenue for the fourth quarter of 2022. Net revenue grew $789 million, or 17% from a year ago, but decreased $3 million from the previous quarter, while net income grew $372 million, or 26%, from the previous year, but decreased $63 million, or 3%, sequentially. The roughly flat sequential revenue and slight decrease in earnings was a bit disappointing given that net revenue grew at a high-single-digit percentage and net income grew a double-digit percentage in each of the previous two quarters. We continue to believe that wide-moat Charles Schwab will have stronger earnings growth in both the near and long term, so we are maintaining our $87 fair value estimate and assess shares are fairly valued to slightly undervalued.