Why E*Trade Is a Must Buy 31 comments
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E*Trade (ETFC). Analysts believe it's now undervalued after trading near $2 less than a month ago. Now at $1.84, ETFC may soon receive a buyout offer. The people I speak with guess $3 to $4 a share will be the offer and could come any day. A few years ago analysts said ETFC could fetch between $10-$11 per share on a buyout deal. Now the book value is about $2.70 a share. Cost savings to an AMTD bottom line of a merger make a lot of sense. ETFC CEO Donald Layton will step down at the end of the year. The poison pill is out; this makes a takeover very easy.
September 18, 2009
Goldman Sachs upgrades E*Trade from Neutral to Buy and raised their 6-month price target from $1.70 to $2.30. The firm cited improving trends in the bank and broker segments.
The firm said,
With improving delinquency trends in the home equity line of credit portfolio and solid brokerage trends, E*Trade appears to have turned the corner in its performance and we estimate the shares have 35% upside from current levels.
September 15, 2009
FBR Capital bumped their price target on E*Trade from $2.00 to $2.25, reiterating their Outeprform rating, citing increased confidence in E*Trade's return to profitability and the improving state of credit and capital at E*Trade Bank.
FBR commetned,
Notwithstanding strong client activity in August, investors should focus on evidence of continued improvement in delinquency trends in E*TRADE's $8.8 billion HELOC portfolio, as well as stabilization in delinquencies in the $11.4 billion one-to four-family portfolio.
The firm said in HELOC, total delinquencies declined 7.2% quarter to date while early-stage delinquencies held steady. The noted that delinquency trends in the one-to four-family mortgage portfolio were better than expected, as total delinquencies were up just 0.4% to $1.68 billion, loans 30 to 89 days past due fell 6.2% to $528 million, and loans 90 to 179 days past due declined 9.2% to $404 million. Loans delinquent greater than 180 days rose 12.2% to $755 million. E*Trade expects total net charge-offs of between $350 million and $375 million during 3Q09, down from $386 million in 2Q09.
September 14, 2009
Citigroup upgraded E*Trade Financial from Hold to Buy and raised their price target from $1.50 to $2.30. The firm said the chance of a takeover of E*Trade increases as loan loss trends have improved.
In 2003, the Toronto-Dominion Bank (TD) held talks to merge its TD Waterhouse discount brokerage with ETFC, but the two sides could not come to an agreement over control of the merged entity. In 2005, ETFC made an unsolicited offer for AMTD, currently the second largest US discount broker. AMTD instead purchased TD Waterhouse, with TD Bank holding a 39% stake in the new entity.
In 2005, ETFC acquired Harrisdirect, formerly a discount brokerage service of the Bank of Montreal (BMO), and BrownCo, formerly a discount brokerage service of J.P. Morgan (JPM).
In July 2008, ETFC sold its Canadian division to Scotiabank (BNS) for CAN$444 million, as part of a program of selling off non-core assets.
In March 2008, ETFC named Donald Layton, formerly JPMorgan Chase vice chairman, as its new CEO. Layton had joined ETFC board of directors in November 2007, at the same time as the Citadel deal. Layton has been aggressively acting on the turnaround plan and the company has stabilized and is seeing the beginnings of a return to growth.
I fully believe ETFC will be bought before the end year. I expect ETFC's stock price will trend above $2 over the next week.
Added note: Great article from istockanalyst out last week on September 17. "E*Trade: Why You Should Buy This Stock Before It’s Too Late"
Disclosure: Long ETFC, GS, AMTD, C
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This article has 31 comments:
1. Citadel average price for ETFC is around $2.50 (Please note I did not do exact math). Being an aggressive hedge fund, they would like to make at least 4-5 times profit.
2. Citadel has a fantastic deal to flow 50% of ETFC trades through their systems - and this is a profit making machine for them. Why do they loose this?
3. Citadel has agressive plans to become another Goldman. They need this brokerage platform.
In my opinion they are crooks and should lose every customer before long. In about six weeks with them I had about 100+ e-mails and phone calls concerning problems and 3 major SEC complaints were required to finally get all of my money back.
Anyone investing in this company or trusting them with their money is crazy!!!
...so they are losing 1.3 Billion per year on their loan portfolio, and have EBIDTA of $305mm. No spank you.
"
“On August 25, 2009, as described in the preceding paragraph, CEF exchanged approximately $800 million face amount of Springing Lien Notes and approximately $230 million face amount of the 8% Notes for a like face amount of Class A Debentures. On September 15, 2009, the Reporting Persons sold approximately $754 million face amount of the Springing Lien Notes and $50 million face amount of the 7.875% Notes in privately negotiated transactions for cash. On September 17, 2009, the Reporting Persons sold approximately $46.6 million face amount of the 7.875% Notes in a privately negotiated transaction for cash. Following these transactions, as of September 17, 2009, the Reporting Persons owned approximately $1,030 million face amount of the Class A Debentures, no 7.375% Notes, no 7.875% Notes, no 8% Notes and no Springing Lien Notes.”
Hopefully, new management cleaned up these stupid tricks and fire these incompetent people.
Overall, ETRADE has a great value. Management must go ASAP.
ETrade got the marketing right. Babies with cell phones.
Welcome to the club. I switched to TD. 6 accounts worth $250,000. Then got TD 3 more accounts.
ETFC is the pits. Same problems you indicate and much, much more. Seems like no one is steering the ship.
On Sep 21 06:30 PM buddhabill wrote:
> "E*Trade expects total net charge-offs of between $350 million and
> $375 million during 3Q09, down from $386 million in 2Q09"
>
> ...so they are losing 1.3 Billion per year on their loan portfolio,
> and have EBIDTA of $305mm. No spank you.
Name me one likely candidate that would be interested.
Merger or not, ETRADE represents a great value, solid trading platform, excellent customer service and employees (not management or Board of Directors.)
As market turns around, more trade volumes, more customers, more money for ETRADE.
My only concern is that ETRADE will lose its opportunities.
so, if your best argument is; "you should buy it because it might be a takeover target" you are gambling, are they or are they not going to be bought ?
50/50 ??
i guess gambling in vegas is safer.
AND, it seems that the Executive VP of E-Trade, after having sold 120,000 shares on 9/21/09, thinks the chances are slim too.
xml.10kwizard.com/fili...
ROFL!
It looks like you're using the same "logic" as the author of this article.
On Sep 21 02:47 PM Ravee wrote:
> What are the chances Citadel will allow ETFC to get out of their
> hands?
> 1. Citadel average price for ETFC is around $2.50 (Please note I
> did not do exact math). Being an aggressive hedge fund, they would
> like to make at least 4-5 times profit.
> 2. Citadel has a fantastic deal to flow 50% of ETFC trades through
> their systems - and this is a profit making machine for them. Why
> do they loose this?
> 3. Citadel has agressive plans to become another Goldman. They need
> this brokerage platform.
But the upside potential on ETFC sure looks compelling.