Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:
TD Ameritrade / E*Trade by Kopin Tan
Summary: Online brokers TD Ameritrade Holding Corp. (NASDAQ:AMTD) and E*TRADE Financial Corp. (NASDAQ:ETFC) took beatings last week on weak earnings and 2007 forecast revisions. Ameritrade shares are down 40% since 2006 while E*TRADE shares have dipped 20% as recent market volatility, they say, scares away retail traders. Currently depressed prices give credence to merger rumors: Sandler O'Neill analyst Richard Repetto says the companies' overlap means a merger could trim at least 15% of combined expenses, boosting pre-tax margins to 59%. A joint company would create a serious competition for Charles Schwab Corp. (NYSE:SCHW). Company managements are clearly open to the suggestion -- the two already looked at consolidation in 2005 before Ameritrade joined up with TD Waterhouse. It make take a few more quarters of weak profits, but merger prospects should create a price floor, and at current valuations, Barron's says both companies may be worth a look now.
Related Links: E*Trade/TD Ameritrade Merger Scenario [Revere] • Despite TD Ameritrade's Weak Quarter, Desjardins Remains Bullish On TD Bank • Online Discount Brokers: Disintermediation Won't Strike Evenly
Conference call transcripts: E*TRADE Financial Q1 2007 Earnings Call Transcript, TD Ameritrade F2Q07 (Qtr End 3/31/07) Earnings Call Transcript