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Short E-Trade Due To Creative Destruction From Robinhood App
- Silicon Valley Start-Up Robinhood will offer completely free trading for cash stock positions.
- This is an existential threat to E-Trade whose business is competing mainly on price.
- E-Trade's valuation and competitive position make it a better short than other discount brokers.
- When a company's bull-market-inspired expansion produces losses, angry shareholders and temporarily reduced animal spirits, CEOs love to talk about returning to "core competencies."
- Around 2010/2011, after the market rout, it was a popular phrase as executives tried to show that they should remain focused on their primary business rather than empire-building.
- We take a closer look at a firm that has returned to a simple model – E-trade Financial Corp.
E-Trade Turnaround On Track, Maintaining $23 Price Target
E-Trade Financial: A Turnaround Story With 40% Upside
E-Trade: Don't Throw The Baby Out With The Bathwater
E-Trade Rolls Out Commission-Free Trades On 93 ETFs
Tue, Oct. 21, 4:56 PM
- Q3 net income of $86M or $0.29 per share vs. $47M and $0.16 one year ago. Quarter included an income tax benefit of about $8M or $0.03 per share.
- DARTs of 153K during quarter down 1% from Q2, up 6% from a year ago.
- Corporate cash of $610M up $40M thanks to a $75M dividend from bank subsidiary.
- Net operating interest income of $269M vs. $241M a year ago, with net interest spread of 2.54%.
- Commissions, fees, service charges and other revenue of $163M vs. $152M a year ago.
- Loan portfolio of $6.7B down $400M from Q2. Provision for loan losses of $10M down from $12M.
- Conference call at 5 ET
- Previously: E-TRADE Financial beats by $0.07, beats on revenue
- ETFC +2.9% AH
Tue, Oct. 21, 4:43 PM| Comment!
Mon, Oct. 20, 5:35 PM
Mon, Oct. 20, 9:36 AM| Comment!
Thu, Oct. 9, 1:18 PM
- At issue were SEC charges that a current and former unit of E-Trade Financial (ETFC -4.1%) failed in its so-called "gatekeeper" role and sold shares in microcap stocks without making sure it met exemptions in the law allowing for unregistered shares to be sold to the public.
- The two units are E-Trade Securities - still a part of the company - and E-Trade Capital Markets, which was sold earlier this year and is better known as G1 Execution Services.
Wed, Sep. 24, 8:41 AM
- Robinhood offers commission-free stock trading (though not publicly available yet) through a slick app which, says the company, puts the interfaces of the established online brokers to shame. “It’s by far the most beautiful brokerage app, though that’s not saying much," says co-founder Vlad Tenev.
- “Most stock brokerages out there have been around for 30 years, their interfaces are clumsy, and they’re targeting older professionals and active traders. They’re no place for first time investors and that’s one of the things we focus on. Making it accessible. Having it be mobile friendly.”
- Still in friends and family private beta now, Robinhood hopes to publicly launch its app in early 2015.
- Watching with interest: ETFC, SCHW, AMTD
Wed, Sep. 17, 3:16 PM
- Leading markets higher as the reality of higher interest rates gets nearer is the financial sector (XLF +0.9%). Whether its banks, brokerages, or insurers, a higher benchmark rate for some time has been considered a key bullish catalyst. An especially large move is being seen in the online brokerage names who have been forced to forego money market fees for years thanks to ZIRP: E*Trade (ETFC +3%), Schwab(SCHW +3.2%), Ameritrade (AMTD +2%).
- Morgan Stanley (MS +1.8%), Bank of America (BAC +1.2%), JPMorgan (JPM +0.9%)
- U.S. Bancorp (USB +1.1%), Regions Financial (RF +2%), New York Community Bank (NYCB +0.8%), Huntington Bancshares (HBAN +1.3%), KeyCorp (KEY +1.3%)
- MetLife (MET +0.6%), Voya Financial (VOYA +0.7%).
- Chubb(CB +0.4%), AIG (AIG +1.1%), Hartford (HIG +0.8%)
- Financial sector ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, KIE, IAT, SEF, IYG, IAK, FXO, KBWB, FNCL, RKH, QABA, FINU, KRU, KBWR, RWW, KBWP, RYF, KBWI, KRS, FINZ
Mon, Sep. 15, 8:12 AM
- August DARTs of 146,165 fell 5% from July and 1% from a year ago.
- Net added brokerage accounts of 13,377 brings the total to 3.1M.
- Source: Press Release
- Previously: Trading activity flattens out at Ameritrade; fee-based balances rise
- ETFC flat premarket
Mon, Sep. 8, 11:01 AM
- E*Trade (ETFC +1.1%) earned $441M over the last 12 months, according to CFO Matt Audette, presenting at the Barclays Financial Services conference.
- Presentation slides
- The path to about $1B begins with interest rates, and a normal interest rate environment will boost revenue by $240M. Next are loan loss provisions which cost $70M in the last year falling to $0 as the legacy portfolio runs off. Servicing those legacy assets cost $43M last year, and that too should fall to $0.
- FDIC expenses cost E*Trade $93M last year and that's expected to fall to $47M as the company's risk profile improves.
- Finally, there's corporate interest expense of $114M dropping to $0 as excess bank capital is upstreamed to the parent and used to pay off corporate debt.
- Alongside the presentation, E*Trade today showed August DARTs of 146,165, down 5% from July and 1% from a year ago. Additionally, E*Trade Bank was approved to send another $75M upstairs to the parent company.
Thu, Aug. 14, 10:24 AM
- Alongside its initiation of Schwab with a Buy, Deutsche's Brian Bedell starts TD Ameritrade (AMTD +0.2%) with the same rating. Of note: The outsourced banking agreement with 41% owner TD Bank allows high returns on cash management without the capital burdens or credit risk, thus giving AMTD to room for buybacks and dividends. As with Schwab, the company has substantial leverage to higher interest rates.
- As opposed to its two competitors, E*Trade (ETFC +0.1%) rates just a Hold.
Thu, Aug. 14, 8:28 AM
Tue, Jul. 29, 10:42 AM
- It's not the first time Charlie Gasparino has floated this report, but E*Trade (ETFC +4.7%) and Schwab (SCHW +1.5%) have their tails in the air as the Fox News reporter says Goldman Sachs (GS +0.6%) is having internal discussions about whether it should swallow up one of the online brokers.
- Also on the move is Ameritrade (AMTD +1.4%).
- Previously: Goldman eyeing online brokers as trading business disappears?
Wed, Jul. 23, 5:56 PM| Comment!
Wed, Jul. 23, 4:43 PM
- Net income of $69M or $0.24 per share vs. $9 7M and $0.33 in Q1 and a loss of $54M or $0.19 one year ago. Revenue of $438M vs. $475M in Q2, and $440M a year ago.
- DARTs of 155K fell 22% from Q1 and gained 4% from a year ago.
- Net operating interest income of $270M up from $266M in Q1, and $243M a year ago.
- Commissions, fees, and service charges of $161M vs. $184M in Q1, and $156M a year ago.
- Operating expenses of $284M fell $6M from Q1 and $130M from a year ago, which included a goodwill impairment charge of $142M.
- The loan portfolio fell $300M from Q1 to $7.1B.
- ETFC -0.1% AH
- Source: Press release
Tue, Jul. 22, 5:35 PM
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Tue, Jul. 1, 3:29 PM
- Significant fixed-income cuts could be coming at Goldman Sachs (GS -0.3%) reports Charlie Gasparino, amid the continuing slowdown in business, with details maybe coming when the bank reports Q2 earnings on July 15.
- Both CEO Lloyd Blankfein and President Gary Cohn come from fixed-income and they've been reluctant to give up on the business, but the full effect of Dodd-Frank regulations are beginning to kick in, and a big change in the bank's business model could be necessary.
- During the internet boom, Goldman sniffed around E*Trade (ETFC +2.8%) and Schwb (SCHW +1.9%), and some bankers, according to Gasparino, say Goldman may need to take another look at purchasing an online brokerage name.
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