Charles Schwab faces downgrades and lowered estimates amidst uncertain outlook.
TL;DR
Morgan Stanley analyst Michael Cyprys downgraded Charles Schwab to Equalweight from Overweight due to uncertainty in cash-sorting trends. With the Federal Reserve raising interest rates, Schwab customers are moving cash out of sweep accounts into money market funds at a rate of $20B per month, which will hurt earnings on top of higher funding costs. Cyprys is cutting his EPS estimates by 30% this year and next to reflect the trends in customer sorting and uncertainty around the rates outlook.
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