The shorts, the skeptics and the doubters are triumphant today, and while I must admit to being amazed at the precipitous and inexplicable drop of this stock, I am just as firmly convinced that E*Trade's future is very bright as I was when the stock was more highly valued.
How it can drop in the face of exploding volumes is amazing to me, and can only be explained (in my view) by the fear that many investors have that we are pissing away the money that we are making. This concern, however, is ridiculous in the case of E*Trade, although it is not ridiculous for many of our competitors. Why? Because E*Trade is killing the competition due to the strength of its brand. It's account acquisition costs are substantially lower than any of its competitors, and it is increasing market share while most of the rest of the OLBs are losing market share.
Here is a question for USMA and other skeptics: why in the world should E*Trade change anything when what they're doing is crushing their competition? Sure, E*Trade could be profitable tomorrow if they would quit advertising, but as long as they are stealing market share from Schwab and company, why should they stop doing what they're doing?
What skeptics need to realize, in my view, is that while E*Trade, Ameritrade, Schwab, etc. are all online brokers, they still are separate companies who have, again in my view, very different futures. While the street is mistakenly lumping all of these companies together, I am extremely confident that E*Trade is going to break out from the rest of them in the not-too-distant future, at least as long as they continue to kick the other OLBs butts... In fact, how could it be otherwise??? |
