Why Charles Schwab Stock Slumped Again on Wednesday

For the second day in a row, equity investors assertively sold out of securities brokerage Charles Schwab (SCHW -5.38%). That wasn’t altogether surprising, as negative sentiment lingered following the Tuesday release of a disappointing earnings report, and a clutch of analysts became notably more bearish on the company. As a consequence, the stock fell by over 5% in price, a worse performance than the 1.4% drop of the S&P 500 index.

An earnings report hangover

The slump on Hump Day was basically the continuation of a sell-off that began the previous day. Investors didn’t like what they saw with Schwab’s second-quarter earnings report despite the fact that the company beat the consensus-analyst estimates for both revenue and profitability.

Adding fuel to the fire was a thorough round of analyst price-target cuts, with one of those prognosticators going so far as to downgrade his recommendation. This was TD Cowen’s Bill Katz, who now feels Schwab is only worthy of a hold at a price target of $71 per share. Prior to this, the pundit was bullish on the company’s future, classifying it as a buy with an $88 target.

All told, five analysts including Katz reduced their price targets on Schwab. Among them was Craig Siegenthaler from influential Bank of America (BAC -0.34%) Securities. Maintaining his underperform (read: sell) recommendation, Siegenthaler lowered his fair-value assessment of the stock to $66 per share from $72.

Reasons not to be cheerful

Personally, I’m a Schwab shareholder, and I feel the company has plenty of strength in its many financial products and services offerings to shrug off an uninspiring quarter. That said, there were good reasons to be concerned with the performance in its second frame; it suffered a worrying 6% decline in net interest revenue, and it seems to be abandoning its banking business (which saw a double-digit drop in deposits of 17%).