I've been an Etrade account and stock holder for the past 3 years. Sure, their service sucks sometimes but I would assume, most people have 1 or 2 other brokers for backup and would not consider pulling out entirely out of Etrade. The last quarters revenue growth most likely caught even Etrade by surprise. And to think that they've been investing heavily in technology. But when you come to think of it, they have the best technology right now, the most scalable, and would most likely solve these problems common to all online brokers much faster.
As for the stock, it is selling at 16X sales. Company is showing 60%+ revenue growth with signs of accelerating this past quarter. And this is on revenues that are ever bigger than Yahoo. In the next couple of years they may clear 500 million in annual revenues. Relative to other internet plays, this stock is cheap. They are also cash flow positive. They loss that they posted is not something they didn't want but is part of their business decision to plow back into growth.
They are positioning themselves as a sub-portal, the next level behind the main portals like AOL, YHOO, MSN. IMO, this is where the next action is. You can only have so many main portals. And, you can only have so many links is a page. Etrade is being positioned as one of this links. And they're positioning their web page as a sub-portal for other financial and e-commerce links. At some point, this opens up a new avenue for revenue. Advertising is also going to come along.
Thieves rob banks before because that's where the money is. Now, E-commerce advertisers and businesses are sniffing the money behind Etrade's customers. As of the last report, that's $2 billion in money market accounts waiting to be spent. Once Etrade overcomes the huge demand, it could start focusing on facilitating easier payment methods for its customers for the other goods and services that are linked to it.
Wall Street, for the last few years had always favored the perceived leader. And Etrade, for better or for worse, is the perceived leader. With 50%+ in institutional holdings, there is much of a case to be made to consider Etrade as another favorite together with AOL. |
