eFinance Outlook
Scott Appleby, scott@rsco.com
eBROKERAGE VOLUME ON TRACK FOR ANOTHER RECORD
On January 24, almost 2 billion shares were traded on Nasdaq, and volume continues to be robust this quarter. Weekly average Nasdaq volume for this quarter to date is about 8 billion shares, 27.9% higher than the December quarter. When the current period is over, we expect the data to surpass last quarter's remarkable numbers. Volume in Internet and other technology issues, which is strongly correlated to eBrokerage transaction levels, is up even more dramatically. This quarter to date, weekly volumes for Robertson Stephens NetDex and TechDex stocks are up 36% and 26%, respectively, over the December quarter's averages.
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KNIGHT/TRIMARK CROSSES 10 BILLION IN JANUARY
According to Autex, Knight/Trimark's (NITE $39-7/16) Nasdaq volume crossed the 10-billion share mark in January. The company's average weekly Nasdaq volume for this quarter is 2.6 billion, a 91% increase over the December quarter's results. In the meantime, Knight/Trimark's market share continues to grow, reaching 22.6% as of February 15, a new high.
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FOR INVESTMENT, THINK eBROKERAGE
Even though all signs point to a solid investment opportunity, in our view, eBrokerage stocks are in a slump. The Robertson Stephens eBrokerage index is up 36.8% from its year-to-date lows but remains 53.5% below its all-time high of 280 set in April. Although competition has increased, all metrics indicate strong growth and fertile market conditions. With 11 million accounts, eBrokerage still represents only 15% of all brokerage accounts in the United States. We continue to like the leaders in the space, which we believe are leveraging their brands and scale and offering consumers compelling value propositions.
Knight/Trimark volume continues to rise, far surpassing the growth rate of Nasdaq volume this quarter and garnering additional market share for the company. We are raising Knight's Q1 and year EPS estimates to $0.70 and $2.15 from $0.51 and $1.82.
E*Trade (EGRP @21-5/8) is our first pick among the eBrokers. With its acquisition of Telebanc, the company appears to be on the way to becoming the first financial services portal. The new E*Trade Bank should benefit greatly from the strength of the E*Trade brand. In addition, E*Trade is encroaching on the industry legend, Schwab (SCH $37-13/16), and we expect it to become the market share leader in daily online trades this quarter.
Ameritrade (AMTD $15-3/4) is reaping the rewards of its successful "Stuart" ad campaign. The company's projected account growth of 90% this year is double the industry average, and its leadership position in the low-cost segment is secure, in our view.
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