Morgan Stanley is taking a step back on shares of Charles Schwab even after the stock's significant March slump.
Analyst Michael Cyprys downgraded the financial services company to equal weight from overweight, citing an uncertain earnings outlook that makes the risk-reward balance for shares appear less compelling. "Stock is down 30% month-to-date, but with limited visibility on multiple variables we are moving to the sidelines," he wrote in a Thursday note. "The SCHW investment thesis has been pushed out and we have less confidence around the timing of an improvement.
This translates to less earnings from monetizing cash as well as higher funding costs, he explained. He added that "cash sorting is not improving at the pace we had expected, and the regulatory landscape is set to intensify, which combined weigh on the earnings outlook, reduce capital return, and limit strategic flexibility." Along with the downgrade, the bank trimmed its price target by 32% to $68 a share. That target still reflects 23% upside from Wednesday's close.