The recent flurry of tariffs has increased recession risks and likely dampened retail trader sentiment, making Charles Schwab an attractive play, according to Morgan Stanley. Analyst Michael Cyprys upgraded Charles Schwab to overweight from equal weight but revised his price target down to $76 from $91. His new target suggests 8.5% potential upside. “The current backdrop is burdened with uncertainty around economic growth, stickier inflation, path of interest rates and recession risks … which raises a greater need for hedging, trading, and risk mgmt by corporate end users and asset owners,” Cyprys said. In this volatile macroeconomic environment, Cyprys said he “prefer[s] brokers with more defensive revenue streams and idiosyncratic earnings growth levers” and names that are “less levered to retail trading and more geared to defensive and durable growth.” Charles Schwab fits this description, according to Cyprys. Cyprys views the company as a more defensive broker against the current backdrop given its ability to drive 20% compound annual earnings growth over the next two years as it pays down expensive loans. The company also has earnings stability in a tariff and rate-sensitive environment given that 47% of revenue is net interest income, and customers’ cash balance growth can support its earnings upside. “We see increased appeal of SCHW’s idiosyncratic earnings recovery story and see scope for greater appreciation of a high-quality franchise amidst a less-certain macro backdrop,” he said. Shares of Charles Schwab are down 5.4% year to date. The stock added 2.8% in premarket trading following the upgrade. SCHW 1Y mountain SCHW stock performance. Most analysts are bullish on the stock. Of the 23 who cover it, 17 rate it as a buy or strong buy, per LSEG. The average price target also signals 27% upside. Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
