From Briefing.com...E*Trade (EGRP 92 7/8) & Ameritrade (AMTD 51)
Brief: E*Trade and Ameritrade are online brokerage companies providing investing services to self-directed investors...Year-to-date, EGRP is up 98.5% and AMTD is up 61.9%.
Trading Points
EGRP & AMTD have soared over the past month as online trading picked up significantly during most recent quarter.
But as yesterday's session proved, these stocks are extremely vulnerable to outside shocks given excessive valuations... AMTD's range: 61-33. EGRP's range: 101-70 5/8... Briefing.com less impressed with recovery off lows than spooked by ease in which these companies gave back recent gains.
As noted above, valuations are out of this world... EGRP, not expected to post a profit for a couple of years, trades at market cap in excess of PaineWebber, the nation's fifth largest brokerage company with trailing twelve month earnings of $2.99... Meanwhile, AMTD sports an estimated p/e of 1159x compared to industry leader Schwab's projected p/e of 70x.
Marketing betting that net mania will continue to drive new account growth, but what happens if net sector experiences another meltdown? Will fast money stay put or investors take the money and run at first hint of real trouble? Based on the speed in which these stocks tumbled Wednesday, anyone holding these shares should be very nervous.
Also important to remember that competition in the online brokerage sector remains intense... As such marketing costs are very high.
On the plus side, EGRP did report a narrower than expected loss and AMTD, which is due to report results on 1/21, also likely to beat estimates... Given huge run-up in price over past month, however, good news factored in.
Briefing.com contends that near-term risk/reward ratio is bearish... As such investors should consider securing profits. |
