Online brokers burning the tape
By Emily Church, CBS MarketWatch
Last Update: 5:06 PM ET Mar 24, 2000
NEW YORK (CBS.MW) -- The online brokers cut loose on Friday with E-Trade, NDB and Wit Capital posting a double-digit percentage gains in on investor speculation for deals and enthusiasm for a big quarter for commissions and account growth.
It's long been known that the March quarter was going to deliver trading numbers for the online -- and offline -- brokerages as Nasdaq and the New York Stock Exchange hit record volume days.
But some industry watchers say that a couple of the more worrisome clouds over the e-brokerage sector were lifting. Rich Repetto, analyst at Lehman Brothers, said he's seeing more institutional interest at least building in the stocks on indications that marketing spending per account looks ready to come off this quarter.
He's forecasting ad spend per account will drop an average of about $250 for the eight largest e-broker, down from an average $320 in the fourth quarter. It's also becoming clear that the retail Wall Street powerhouses haven't yet succeeded in cutting off the e-brokers air supply. Those assumptions will be checked against results in account growth and assets per account.
To look at one early example, Datek Online hit 160,000 trades three times in early March, spokesman Mike Dunn said. Datek's biggest trading day in the fourth quarter was in December with 126,000 trades. As far as account growth goes, Datek's seen a 31-percent increase over the fourth quarter to 444,445 accounts with assets through March 23, he said.
The online brokers have always been the object of some scorn from brokerage industry executives, but it seems these days that fewer of them are willing deride the power of their retail channels.
The importance of retail, meaning the ability to get to individual investors for trading and for raising finance, is one reason why some like analysts Greg Smith of Chase H&Q say, for example, that a blue chip New York name like Goldman Sachs (GS: news, msgs) needs discounter Charles Schwab (SCH: news, msgs) more than Schwab needs Goldman. As a result, Smith isn't as excited to add to the persistent talk that the two firms are headed down the aisle.
One trigger for the heady rise in the stocks Friday came via New York-based Wit Capital (WITC: news, msgs)
which late Thursday told investors it expected to beat earnings estimates for the latest quarter.
Another boost came from Piper Jaffray, which raised revenue and narrowed loss forecasts for Ameritrade (AMTD: news, msgs) and E-Trade (EGRP: news, msgs) on Friday.
According to First Call, the consensus estimate for E-Trade for the quarter has narrowed to a 17 cent per share loss from 19 cents on March 1; for an 8 cent per share loss for Ameritrade from 10 cents on March 1 and for a 25 cent per share profit for Schwab vs. 22 cents.
But the averages aren't telling the full story on the degree to which the analysts are upping estimates using models that are based on expectations that daily trading volumes are at least 45 percent higher than seen in the December quarter. Piper Jaffray's Stephen Franco, for one, is now forecasting a 4 cent per share loss for Ameritrade in the March quarter.
The upward revisions started surfacing more than a month ago from the sell-side analysts who cover the industry, but the stocks are still moving higher on the heels of the latest bullish calls.
"It's getting a bit crazy, but I do feel that these moves are fully justified," said H&Q's Smith. "We were discounted from the fundamentals, and there's still a lot of bearish sentiment around these names, which I think is a bullish indicator."
Wit said it's better-than-forecasted quarter was due to the trading environment. See full story.
Charles Schwab was up 3 11/16 to 54 15/16. E-Trade (EGRP: news, msgs) was up 4 1/8, or 14.8 percent, to 32 and Ameritrade was up 2 5/16, or 10.5 percent, to 24 1/4. Also higher: TD Waterhouse (TWE: news, msgs), DLJ Direct (DIR: news, msgs) and National Discount Brokers (NDB: news, msgs). Wit, meanwhile, was up 4 7/8, or 29 percent, to 21 7/16. |
