EGRP beat estimates by a penny.
ETrade Losses Mount
(10/14/98 3:52 p.m. ET)
By Gabrielle Jonas, TechInvestor
Blaming a costly membership acquisition strategy, Internet brokerage ETrade Group reported a fourth quarter net loss far below analyst expectations on Wednesday.
Those losses will continue during the next few quarters, ETrade said.
For the fourth quarter ended Sept. 30, ETrade posted a loss of $15.7 million, or 33 cents per share, on revenue of $68.7 million. Wall Street had been expecting a loss of 14 cents per share, according to First Call's survey.
Excluding a charge of $9.5 million, or 20 cents a share, for costs associated with the acquisition of ShareData, which makes stock plan software, ETrade's loss was one penny less than estimates.
The charge also included costs related to marketing alliances with AOL and Yahoo, as well as for a revamped website.
In the comparable quarter a year ago, the company showed profits of $9.6 million, or 15 cents a share, on revenue of $52 million.
Palo Alto, Calif.-based ETrade had previously announced it expected to see losses as a result of its membership acquisition strategy, launched in September.
The acquisition and alliances are expected to result in losses during the next several quarters, CEO Christos Cotsakos said in a statement.
During the fourth quarter, the dollar value of customer transactions per week averaged more than $1.7 billion, up 13 percent from $1.5 billion in the previous quarter. Transactions reached an all-time high of 1.9 million for the quarter, up 27 percent from the year-ago quarter and up 6 percent sequentially.
ETrade added 85,000 new accounts for a total of 544,000 at the end of September. But James Marks, an analyst with Deutsche Bank, said it's difficult to tell whether the new accounts are options accounts, which don't contribute much to revenue, or actual brokerage accounts, which do.
"They won't tell me," Marks said, "and I ask them the same question every quarter."
On the upside, Marks said, the cost of landing each account was about $325 dollars, about $75 less than he expected.
For fiscal 1998, after charges, ETrade posted a net loss of $1.3 million, or 3 cents per share, on revenue of $245.3 million, compared to net income of $15 million, or 42 cents per share on revenue of $156.4 million in fiscal 1997.
Earlier this week, BancBoston Robertson Stephens downgraded the stock to buy from strong buy. And last week, Raymond James downgraded the shares to neutral from buy.
Marks maintains a hold rating on the stock. "They're claiming all sorts of one-time charges they haven't really detailed yet," Marks said.
"Over the long term we are positive about the company, but a declining price could prompt us to change our opinion," Marks said.
Shares of ETrade [EGRP] closed up 1/4 to 13 1/4 ahead of the earnings release on Wednesday. <Picture: TW> |
