It's cruel math, but what else can one say when even the E*Trade
Baby's age has probably passed the discount broker's share price?
This has to be frustrating for investors because the company's
metrics are refreshingly solid. This morning's monthly activity update
for April is inspiring. E*Trade ended the month with a record 4.5
million accounts, closing out April with 32,550 more brokerage accounts
than when it started.
Sure, E*Trade's net banking accounts shrank by 6,677 last month, but
it's hard to promote online banking when interest rates are falling.
During the first quarter alone, the company's flagship Complete Savings
Account (CSA) vehicle has gone from yielding a healthy 3.01% to a more
pedestrian 1.54% rate. As for this morning, the yield has shrunk to a
mere 0.95%. Money market rates have taken a hit all over, but it's less
compelling to transfer out of a bank to "chase" a payout of less than
1%, even if it is five times the national average.
Either way this is a brokerage growth story, and April rocked on
that front. With 230,345 daily average revenue trades last month -- up
nearly 35% from last April and a respectable 7% uptick from March --
the flurry of trading activity is E*Trade's friend. The firm has had
seven consecutive months of net inflows, with $300 million in net new
customer assets in April.
Then reality hits you like bird poop falling on a shady park bench.
Analysts see an entirely different E*Trade. They see losses widening
this quarter, unlike the consistent profitability investors find in larger rivals Charles Schwab (Nasdaq: SCHW) and TD AMERITRADE (Nasdaq: AMTD). Even smaller niche specialists like optionsXpress (Nasdaq: OXPS) and thinkorswim (Nasdaq: SWIM) are routinely in the black.
April's strong start will naturally lead shareholders to bet on
E*Trade outsmarting its pessimistic analysts, but that trend isn't
kind. The company has posted wider-than-expected losses in each of the
past six quarters.
Sure, E*Trade is cool. It has a winning marketing schtick with the E*Trade Baby. It is ahead of the curve in rolling out smartphone apps for Apple (Nasdaq: AAPL) iPhone and Research In Motion (Nasdaq: RIMM)
BlackBerry jockeys. However, its stock is smarting because its income
statement hasn't been able to keep its end of the bargain.
A few more months like April, and E*Trade will be able to change
that. Until then, though, it will have to enviously watch Schwab and
AMERITRADE frolic in the teens without it.
© 2009 UCLICK, L.L.C.
It's the DEBT
The reason Etrade is "only $2" is because of their incredible debt load. Share price means almost NOTHING when they have $14b in debt, and tons of other liabilities. Have Americans totally forgotten to what a balance sheet is?
E*Trade has great potential
With the number of companies that are stopping the matching contributions into the 401k's and the number of investment brokers that have turned record losses in the past year, people are going to take matters into their own hands and open up online investment accounts.
ETrade was a stock valued at over $27 in the past and is now trading at a mere buck and a half- Its a no brainer!
I really do hope that
I really do hope that etrades heads in the right direction. I have lots of money in this for it to fail me. I know that the Layton has done an outstanding job and I know that with him on board it will all better. Lets hope for the best!
Advertising
I totally agree. A few weeks ago, I realized I couldn't find a web page that didn't feature an ETrade ad. I figured it had to mean a good future for them. Lo and behold, they manage to turn a loss even with all the new accounts. Now I figure they're just blowing waay too much on advertising but it may still pay off in the longer term.
Etrade has also started
Etrade has also started breaking down buy/sell transactions to increase brokerage fees. This has also occurred using All-or-None buy/sell transactions of over 300 shares.
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