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Financial services stocks fell sharply as the plight of SVB Financial Group triggered a sell-off in banks, but investors should use the decline to buy up Charles Schwab shares on the cheap. Shares of Charles Schwab fell more than 7% on Friday morning after falling almost 13% during Thursday’s trading session. Mountain SCHW 5D Charles Schwab’s big drop after SVB Financial’s announcement The big drop in financial services stock was driven by a massive sell-off in technology-focused bank SVB Financial. Investors lost confidence in SVB after it announced a plan to raise more than $2 billion in capital to offset losses from the bond sale. The concern extended to the financial sector as a whole, which fell 4.1% on Thursday, its worst day since June 2020. Schwab shares. “The parallels with SIVB are superficial,” UBS analyst Brennan Hocken wrote in a note on Thursday. “While SCHW has a relatively long-standing portfolio and declining deposit balances, the similarity ends there, in our view.” Hawken added: “SIVB is a traditional lender primarily serving early-to-mid-tier technology companies and VC-backed growth companies, while SCHW serves retail wealth management (a structurally tighter deposit base). (on average, deposits are down 9% year on year), they have several levers they can use before selling securities at a loss.” UBS recommends buying Charles Schwab shares. The company’s price target is $90, which suggests upside potential of about 35% from Thursday’s closing price. Deutsche Bank also called the sell-off “exaggerated”, saying investors exaggerated Schwab’s liquidity risks. Analyst Brian Bedell wrote that Thursday’s drop created an “attractive buying opportunity.” “Overall, we believe that SCHW’s liquidity profile is fairly resilient against an expected or even more severe scenario of client deposit withdrawals from its balance sheet,” Bedell said. He set a price target of $109 and maintained his buy rating. Morgan Stanley also agrees that the sell-off is overdone. Analyst Michael J. Cypris maintained his “overweight” rating on the stock and expects it to rise nearly 50% from Thursday’s closing price. Cyprys said in a note to clients on Friday that “The sell-off represents an attractive entry point for a high-quality franchise that should be able to handle liquidity risks better than market prices given significant financial strength/flexibility, liquidity profile and significant revenue/generation.” capital.” Piper Sandler is also overweight in stocks and has maintained her price target at $100, noting that “we see a significantly different scenario compared to banks like SIVB.” “We note that SCHW continues to be well above its regulatory capital minimum (Tier 1 leverage ratio was ~7.2% on YE22 vs. the minimum requirement of 4.0%),” analyst Richard Ripetto wrote in a Friday note. “We believe yesterday’s selloff is overblown and could be an attractive entry point into one of the strongest brands in the financial services industry.” — Michael Bloom of CNBC
Credit: www.cnbc.com /
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