Summer may be starting to sizzle, but Charles Schwab
When explaining the likely shortfall, Schwab, a Motley Fool Stock Advisor pick, cited a litany of issues on people's minds right now: the possibility of rising interest rates; continued international uncertainties; and investors' newfound fickleness, likely the result of concerns that the market's overheated. Not to mention, summertime is notorious for tapered-off trading as people make getting away from it all a priority.
In May, Schwab's daily average revenue trades dropped 18% from April, and 6% from the same period the year before. Schwab said hitting the $0.11 per share estimate is unlikely because investors are dragging their feet and because of its recently instituted cuts in commission fees, its attempt to lure investors away from the competition.
Is this an understandable downturn? Recently, Fool contributor Roger Nusbaum, a former Schwab employee, voiced his concerns about the company's ability to compete in recent years, stating his case that Schwab's got a struggle on its hands.
But things are slowing down for the securities industry in general, and in that regard, Schwab certainly isn't alone. Just days ago, rival Ameritrade
The important thing for investors to note is that trading lulls are normal. Meanwhile, for the next year or so, the online brokers, which also include E*Trade
Investors weren't put off, sending Schwab's stock about 2% higher, even though cost cuts and layoffs may loom. Indeed, all the stocks in the sector enjoyed a little boost today; all have retreated from their 52-week highs and some investors are likely bargain hunting.
The biggest question for investors, though, is whether Schwab is just one of the gang or really is struggling to attract and retain clients. It may be long after we say farewell to summer to know for sure, and as far as buying into the sector, it makes Schwab a shade riskier than the rest right now.
Are you taking time out from surf and sand to shop for a discount broker? Be sure to check out Rick Munarriz's comparison, Don't Get Blindsided by Your Broker, or chat with other Fools on the Discount Brokers discussion board. If you'd rather come up with action plans for your golden years than invest in stocks right now, get the jump on our upcoming retirement newsletter.
Alyce Lomax does not own shares of any of the companies mentioned.