EGRP - Bullish comments by Robertson Stephens - FULL REPORT:
01:32pm EST 9-Dec-99 Robertson Stephens (Appleby, Scott 415-248-4202) EGRP
Raising Estimates on E*TRADE -Nine out of Top Ten Record
NASDAQ Volume Days Occurred Since November 1.
Key Points:
*According to E*Trade management, daily transactions are reaching record volumes
this quarter and have even neared upper capacity limits.
*The Robertson Stephens eBroker Index ended November at 133, a 53% decrease from
the high of 280 achieved on April 13, 1999. Despite the obvious volume gains
in the marketplace, we don't believe investors are adjusting expectations to
reflect the operating leverage in the eBrokerage model. However, we do believe
that over the course of the next six weeks, as evidence mounts of an all time
record quarter, the Robertson Stephens eBrokerage Index will rise as will the
eBrokerage leaders, including Ameritrade, E*Trade and Knight/Trimark.
Furthermore, Schwab reports its November trading volumes Monday (according to
the company). We expect sequential volume growths of 30%-40%. Additionally, We
expect this announcement to be a catalyst for the group
** For E*Trade, we are raising EPS from a loss of $0.21 per share to a loss of
$0.20 per share, and raising revenue estimates by 4%, from $207.55 million
to $215.83 million, due to greater than expected trades per day for FY1Q99.
** NASDAQ hits nine out of the top ten volume record days since November 1 and
20 of the last 24 trading days have made the top 25 volume record list.
** Knight/Trimark volume for November hits 6.4 billion, up 23% from April
volume of 5.2 billion.
** Volumes are back, what about prices?-NASDAQ and Knight/Trimark volumes have
returned from the summer slump and have well exceeded records set in April,
but the Robertson Stephens eBroker Index isn't reflecting this increasing
activity.
We are increasing E*Trade EPS and increasing revenue estimates, due to
increased trading activity during FY1Q99.
According to E*Trade management, daily transactions are reaching record volumes
this quarter and have even neared upper capacity limits. To address this surge
in recent activity, we have made adjustments to our model by increasing the
number of trades per account/month from 2.05 to 2.16 for FY1Q99. As a result,
total trades for FY1Q99 have increased to from 6.8 million to 7.2 million,
increasing transaction revenue from $129.59 million to $136.54 million and
total revenue will increase from $207.55 million to $215.83 million. In
addition, EPS is also estimated to improve from a loss of $0.21 per share to a
loss of $0.20 per share.
NASDAQ hit eight out of top ten record volume days in November, totaling nine
out of ten record volume days since November 1.
According to Factset, nine out of the top ten record setting volume days have
occurred since November 1, breaking all previously set records. In addition,
20 of the last 24 trading days have hit the NASDAQ top 25 list for record
volume days, blowing away remnants of the record days set back in April.
Figure 1: Top Ten Record NASDAQ Volume Days in Billions
1 November 17, 1999 1.6132 December 3, 1999 1.527
3 November 18,1999 1.5194 November 29, 1999 1.499
5 December 7, 1999 1.4966 November 16,1999 1.458
7 November 30,1999 1.4578 November 9, 1999 1.429
9 November 23, 1999 1.42610 April 14,1999 1.416Source: Factset
NASDAQ monthly volumes increased to a record level of 29.28 billion in
November, a 29% increase from October volume of 22.64 billion. Prior to
November, April held the monthly volume record with 24.27 billion, a volume
that is 20% lower than November's record level. NASDAQ weekly volume for this
quarter to date is 6.0 billion, a 24% increase from last quarter's average
weekly volume of 4.8 billion. We believe that December will continue with
strong volumes and increase CY4Q99 average weekly volumes to new levels,
further heightened records.Figure 2: Monthly NASDAQ Volumes
According to AutEx, Knight/Trimark hit a record 6.4 billion in volume for the
month of November, a volume that is 68% greater than October volume of 3.8
billion. Previously, April held the record month with 5.2 billion, but November
has exceeded April volumes by 23% to 6.4 billion. NITE market share also
increased during November by gaining an additional 4.2% market share from
October to November, raising market share from 14.6% to 18.8%.
Figure 4: Knight/Trimark Monthly Volume and Robertson Stephens eBroker Index
Source: BlockData and Robertson Stephens analysis
NASDAQ and Knight/Trimark volumes are back and stronger than ever, but prices
are lagging.
NASDAQ and Knight/Trimark volumes have made a strong come back this quarter
from last quarter's slump. Both NASDAQ and Knight have set record volumes,
that well exceeded the volume highs of April, but stock prices are lagging.
The Robertson Stephens eBroker Index ended November at 133, a 53% decrease from
the high of 280 achieved on April 13, 1999. Despite the obvious volume gains
in the marketplace, we don't believe investors are adjusting expectations to
reflect the operating leverage in the eBrokerage model. However, we do believe
that over the course of the next six weeks, as evidence mounts of an all time
record quarter, the Robertson Stephens eBrokerage Index will rise as will the
eBrokerage leaders, including Ameritrade, E*Trade and Knight/Trimark.
Furthermore, Schwab reports its November trading volumes Monday (according to
the company). We expect sequential volume growths of 30%-40%. Additionally, We
expect this announcement to be a catalyst for the group. |
