OK guys- Here is your Ameritrade story (and EGRP)
cbs.marketwatch.com
True Ameritrade please stand up
Broker up on bank deal but analyst views mixed
By Emily Church, CBS MarketWatch
Last Update: 5:43 PM ET Nov 16, 1999 NewsWatch
NEW YORK (CBS.MW) -- Ameritrade's stock rose 16 percent on Tuesday on renewed talk the online brokerage is an acquisition candidate, and amid a little help to the financial group from the Federal Reserve.
The stock (AMTD: news, msgs) continues to post gains from Ameritrade's new alliance with Schwab (SCH: news, msgs) and TD Waterhouse (TWE: news, msgs) in the as-yet-unnamed Internet investment bank and on expectations for strong commission revenue from a banner November in the markets, said Greg Smith, analyst at Hambrecht & Quist.
The Fed's switch Tuesday afternoon to a "neutral" bias on changing interest rates lifted the entire sector, and particularly the brokerage group ($XBD: news, msgs). See related story.
Mixed views
At the same time, however, Wall Street is giving investors a mixed picture on the company. CBIC World Markets analysts on Tuesday started coverage of the Omaha discounter with a "hold" recommendation, tipping the scales toward caution.
Of the eleven analysts covering Ameritrade, six now have "holds" on the stock and five are recommending it as a "buy," according to First Call.
CIBC said Ameritrade's deep discount model on the Web, at $8 a trade, had the "weakest prospects" for strong growth. The bank is looking at the sector to turn its focus from growing new accounts to maintaining "high quality", presumably asset-laden, accounts.
"With almost all of the hyper active traders already on the Web, future customer growth at Ameritrade might be strong, but those new customers will trade at levels below the company's current high average," analyst Amar Mehta told clients.
The New York bank also started E-Trade (EGRP: news, msgs) at a hold and TD Waterhouse (TWE: news, msgs) at a strong buy.
Other analysts are bullish on Ameritrade. Scott Appleby at Robertson Stephens rates the stock as a buy and said on Monday that the bank "especially likes Ameritrade for valuation purposes." He's expecting 100 percent growth in online brokerage accounts over 1998, based on industry account growth far exceeding estimates for the December quarter, and coming in around 1 million new accounts.
Meanwhile, analyst Richard Zandi of Salomon Smith Barney in a note to clients Tuesday, said the Internet investment bank announcement on Monday "appears to us to be a precursor to consolidation.
"We view it as evidence of the belief, particularly by Schwab, that the advantages of scale are too compelling to risk losing by going at it alone. However, it may also be an indication that current valuations are prohibitively rich to afford outright acquisition," he said.
Ameritrade ended up 4 5/16 to 30 3/4; E-Trade rose 1 1/16 or 2.8 percent to 39 3/16 and TD Waterhouse rose 1 3/8 or 7.2 percent to 20 3/8. Charles Schwab (SCH: news, msgs), the largest online broker, rose 1 3/8 or 3.1 percent to 46 1/8.
Ameritrade officials late Tuesday declined to comment on the movement in the brokerage's stock. |
