59.80 -0.11 (-0.18%)
Pre-market: 8:46AM EDT
|Bid||59.91 x 41800|
|Ask||60.49 x 2900|
|Day's range||59.78 - 60.99|
|52-week range||39.12 - 66.46|
|PE ratio (TTM)||23.54|
|Earnings date||19 Jul 2018|
|Forward dividend & yield||N/A (N/A)|
|1y target est||70.33|
E*trade (ETFC) and TD Ameritrade (AMTD) are household names in the finance space which investors are likely familiar with. However, there is a new upstart challenger in town, called Robinhood, which E*trade and TD Ameritrade may have to watch out for.
E*TRADE Financial Corporation (ETFC) is scheduled to release its second-quarter results on July 19. Wall Street is expecting EPS of $0.89, implying year-over-year growth of 27.1%. This growth is expected to come largely from higher net interest income as well as higher commissions. However, sequentially, the company’s commissions are expected to decline on the back of lower market movements resulting in lower trading activity among the company’s clients.
With Q2 almost nearing its end, E*TRADE Financial (ETFC) climbs 10.5% quarter to date, significantly outpacing the industry it belongs to.
In the second quarter, brokerages are expected to witness a sequential decline in their daily average revenue trades (or DARTs). In the first quarter, the primary drivers for the higher DARTs were volatile markets coupled with interest rate expectations. However, the earnings season and the stronger economy reduced the volatility in the equity markets in the second quarter.
E*TRADE Financial Corporation’s (ETFC) EV-to-EBITDA ratio is ~38.1x. This reflects its premium valuations in relation to its competitors’ average of ~25.7x. The company’s competitors have the following EV-to-EBITDA ratios on an NTM (next-12-months) basis: Charles Schwab Corporation (SCHW): ~48.2x TD Ameritrade Holding Corporation (AMTD): ~12.4x Interactive Brokers Group (IBKR): ~16.4x
Charles Schwab (SCHW) has witnessed an increasing trend in its net interest income during the past few quarters. The Federal Reserve’s decision regarding interest rates is the primary factor responsible for the growth in brokerages’ net interest income. Moving forward, this momentum is expected to continue due to the rising interest rate environment.
Brokerage (VFH) performance is primarily driven by the performance of the equity markets. In the March quarter, higher volatility and client participation drove the trading revenues of Charles Schwab (SCHW), E*TRADE Financial Corporation (ETFC), TD Ameritrade Holding Corporation (AMTD), and Interactive Brokers Group (IBKR).
After lower volatility in April, the markets were again volatile in May, which boosted brokerages’ (VFH) daily average revenue trades (or DARTs). Overall, volatility was lower sequentially in the second quarter, hinting that brokerages’ trading revenues might fall. The primary factors that reduced volatility in the second quarter were corporate earnings, improvement in employment, and settling geopolitical tensions.
Strong fundamentals and higher interest rates will support Schwab's (SCHW) profitability while persistently rising operating expenses remain a major concern.
The Federal Reserve’s June meeting is slated for June 12–13. Most of the market observers expect a rate increase to control inflation. Thus, brokerages (VFH) like Charles Schwab (SCHW), TD Ameritrade Holding (AMTD), E*TRADE Financial (ETFC), and Interactive Brokers Group (IBKR) are expected to attract attention primarily because higher rates pave the way for higher interest income for these companies.
Five financials near buy points are your stocks to watch this week: Square, PayPal, TD Ameritrade, E-Trade Financial and SVB Financial.
Investors in E*TRADE Financial (ETFC) need to pay close attention to the stock based on moves in the options market lately.
Improvement in Interactive Brokers' (IBKR) DARTs on a year-over-year basis indicates that the company's revenues are expected to continue rising in the near term.
Rising expenses and lack of geographic diversification remain major causes of concern for Raymond James (RJF), while strategic acquisitions may provide some support.
In the second quarter, Interactive Broker Group (IBKR) is expected to witness a drop in its commission revenues sequentially due to a fall in its DARTs (daily average revenue trades). In May, Interactive Broker Group saw 780,000 DARTs—a fall of 4% month-over-month and a rise of 16% YoY (year-over-year). In April, Interactive Brokers Group reported 812,000 DARTs. E*TRADE (ETFC) reported 249,939 DARTs in April.
TD Ameritrade’s (AMTD) performance will likely depend on the economic and political factors prevailing in the economy. In the quarter that ended in March, TD Ameritrade’s performance was supported by strong volatility due to the Trump Administration’s announcement about imposing tariffs and interest rate hike expectations. For the company, a rising interest rate environment would mean higher interest income from interest-earning assets, which would boost the interest income.
TD Ameritrade (AMTD) is expected to report an EPS of $0.8 in the fiscal third quarter, which ends in June. Wall Street analysts gave a high estimate of $0.85 and a low estimate of $0.76 for the third-quarter EPS. Sequentially, the company is expected to witness a marginal decline in its trading volumes in the third quarter due to less volatility in April.
TD Ameritrade (AMTD) operates in a very competitive industry. The company needs to retain its clients in order to experience long-term growth. There’s a pressing need to come up with digital tools to make trading easy and accessible.
TD Ameritrade (AMTD) benefited from clients’ higher trading activities in the second quarter, which ended on March 31. Brokerages’ performance would be boosted if equity markets experience high volatility. The volatility would lead to more trading among clients and improve the trading revenues.
Of the six analysts covering Interactive Brokers (IBKR), two recommend “strong buy,” two recommend “hold,” and two recommend “strong sell.” Last month, their ratings were the same. In March, just five analysts were covering the stock, with one recommending “strong buy,” two recommending “hold,” and two recommending “strong sell.”