Hook & thesis
Charles Schwab is a core buy here for investors who want exposure to the secular growth of retail investing without paying speculative multiples. The business is generating meaningful free cash flow, expanding client assets, and saw record revenue in 2025. Price weakness over the last few weeks has pushed Schwab below its 10/20/50-day moving averages and into an RSI-driven oversold condition. That combination creates a tactical entry for long-term investors.
My trade: buy at $93.87 with a stop at $86.00 and a target of $110.00, horizon roughly 180 trading days. The idea is simple: own a cash-generative, scale-driven brokerage at a reasonable multiple while tailwinds in trading volumes, net interest income and asset-management fees continue to support earnings.
What Schwab does and why investors should care
The Charles Schwab Corporation is a diversified brokerage and banking franchise offering retail brokerage, wealth management, custody and advisor services. Its scale matters. The firm reported total client assets of $11.9 trillion and achieved record revenue of $23.9 billion for fiscal 2025, up 22% year-over-year. Client acquisition remains robust - new brokerage account openings exceeded 1 million for the fifth consecutive quarter and core net new assets in Q4 were $163.9 billion.
Why that matters: Schwab's model benefits from several reinforcing dynamics. Higher client assets increase recurring asset-management fees and custody revenue, elevated trading volumes lift transactional fee income, and a larger deposit base increases net interest revenue. Those three levers drove Schwab's 2025 performance and underpin its free cash flow generation.
Recent financial shape - the numbers that support the trade
| Metric | Value |
|---|---|
| Market cap | $169.8B |
| Revenue (2025) | $23.9B (record, +22% Y/Y) |
| Free cash flow | $12.69B |
| EPS (trailing) | $4.37 |
| P/E | ~21x |
| Price / Book | ~3.4x |
| ROE | ~15.7% |
| Client assets | $11.9T |
Those figures show a high-quality cash generator. Free cash flow of roughly $12.7 billion gives the company flexibility for buybacks and dividends, and ROE near 16% is healthy for a capital-light, scale-dependent brokerage. Schwab's P/E in the low-20s and price-to-book near 3.4x leave room relative to higher-growth fintech peers that trade at much higher multiples.
Technical and sentiment context
The stock is trading below its 10-, 20- and 50-day moving averages and the 9-day EMA sits above the current price, signaling short-term momentum is negative. RSI around 37 suggests the name is nearer oversold than overbought and short interest is manageable (days to cover near 1.4). Put together, this is a pullback inside a fundamentally intact story - a classic buy-the-dip situation for investors who want exposure to the brokerage cycle without paying frothy multiples.
Valuation framing
At a market cap in the neighborhood of $165-170 billion and a trailing EPS around $4.37, the stock trades at roughly 21x earnings. For a company with $12.7 billion of free cash flow and a recorded $11.9 trillion of client assets, that multiple is reasonable. Schwab is not a high-growth cloud software name, but it is a durable, high-margin financial franchise that benefits from balance-sheet scale. Compared with fast-growing fintech peers that often trade well north of 30-40x, Schwab looks attractively valued for the risk profile it brings.
Catalysts that could drive the trade
- Continued net new asset inflows and sustained trading volumes - 2025 trading volumes jumped 31% and net new assets were $163.9 billion in Q4; repeating even a portion of that trajectory would push revenues and EPS higher.
- Improving net interest revenue if short-term rates remain elevated - more deposit float and higher yields can drive incremental NII without proportional expense growth.
- Share buybacks supported by strong free cash flow - $12.7B in FCF provides runway for buybacks that boost EPS and valuation.
- Multiple re-rating if investor sentiment shifts back toward financials and brokers after AI-related sector rotation eases.
Trade plan (actionable)
Entry: buy at $93.87.
Stop loss: $86.00 - this limits downside to roughly 8% and sits below recent short-term support levels while giving the trade room to breathe.
Target: $110.00 over a long-term horizon (180 trading days). This target is above the recent 52-week high of $107.50 and assumes continued organic growth in assets, trading volumes, and modest multiple expansion.
Horizon rationale: long term (180 trading days) - Schwab's performance is anchored to multi-month lines of business (assets under management, net interest income, and client retention). This horizon gives time for quarterly results and potential buyback activity to materialize and for sentiment to normalize after short-term market reversals.
Risks and counterarguments
- Macro risk - a broad market correction or recession could drive asset outflows and reduced trading activity, compressing revenue and EPS. Brokerage earnings are cyclical and tied to AUM and volumes.
- Margin pressure from competition - fee compression from other low-cost brokers or fintechs could weigh on asset-management and custody revenues over time.
- Interest-rate sensitivity - while higher rates have helped net interest revenue, sudden rate declines would reduce NII and hurt profitability.
- Regulatory and litigation risk - large broker-dealers face regulatory scrutiny and potential fines that can hit earnings or require capital actions.
- Short-term technical risk - momentum indicators are negative; the stock could undercut the stop if overall market sentiment deteriorates before fundamentals reassert themselves.
Counterargument: Critics will say Schwab is a mature, low-growth financial business and should only trade at low single-digit P/E multiples. They point to fintechs that win share through product innovation and younger customer cohorts. That is a fair concern - if Schwab fails to retain margins or loses material deposits to competitors, the multiple could compress. However, Schwab's scale, diversified revenue mix (trading, NII, asset management), and strong free cash flow argue for a premium to legacy bank multiples and a valuation closer to the mid-teens to low-20s P/E range in a normalized environment.
What would change my mind
I would step aside if Schwab posts consecutive quarters of material asset outflows (core net new assets turning negative for multiple quarters), or if free cash flow materially declines from the current level and buybacks are halted. Likewise, sustained margin erosion in asset management or sharp deposit losses to higher-yield competitors would make me reassess. On the upside, accelerating organic growth in AUM, a material increase in NII, or an aggressive buyback program would make me more bullish and could justify moving the target higher.
Conclusion
Schwab is a pragmatic buy at $93.87 for investors looking for a core long-term holding in the brokerage/wealth-management space. The company combines scale, free cash flow, and durable customer flows, yet the stock is not priced for perfection. My trade balances upside potential (to $110) with a disciplined stop ($86) and a long-term horizon (180 trading days) to let fundamentals play out. For investors who need a defensively positioned financial exposure with measurable optionality from AUM and trading cycles, Schwab merits a purchase at these levels.
Trade plan recap: Buy $93.87 / Stop $86.00 / Target $110.00 - horizon: long term (180 trading days).