TD Ameritrade Holding Corporation (NASDAQ: AMTD) reported earnings for its second fiscal quarter yesterday, and they were pretty decent for the most part -- some might have thought that investors were completely shunning the market because of all the volatility going on, but TD Ameritrade's results show that a broker can still make money in such a challenging climate.
Even so, overall revenues declined 3% to $623 million. While transaction-based revenues also declined, it should be noted that average client trades per day did increase 23% to 312,000. That's an important measure when talking about brokers such as TD Ameritrade, or competitors such as E TRADE Financial Corporation (NASDAQ: ETFC) and The Charles Schwab Corporation (NASDAQ: SCHW). Earnings per share really shined, rising 35% to $0.31 per diluted share.
TD Ameritrade is sticking to its earnings guidance of a "midpoint forecast of $1.32." Of course, I'd like to see raised guidance, but a reaffirmation is certainly better than a reduction in guidance. Besides, I have to go back to the challenging climate concern -- if TD is happy to keep the forecast right now, then this is definitely positive. Investors would probably do well to at least investigate the brokers. When the economy snaps back, they should rally higher from these levels. TD Ameritrade, while not right up against a 52-week high, actually isn't that far from it, interestingly enough.
Disclosure: I don't own shares in any of the companies mentioned here; positions can change at any time.
Jarrett Lilien, E-Trade Financial Corporation's (NASDAQ: ETFC) president and COO, who lost out on the CEO job last month to Donald Layton, is going to resign from the online brokerage firm, the Wall Street Journal reported; Layton doesn't plan to fill the position.
Chinese Internet search firm Baidu.com Inc (NASDAQ: BIDU) is poised for aggressive growth but must also confront a number of obstacles, according to the Wall Street Journal's "Heard in Asia," including a number of lawsuits regarding its music services and a vacancy in the CFO position.
Alibaba Group, a Chinese Internet company , is in advanced talks with investors to finance its acquisition of Yahoo! Inc's (NASDAQ: YHOO) stake to expand its management independence, the Wall Street Journal reported.
OTHER PAPERS:
According to inside sources, the New York Post reported that billionaire Joseph Lewis and former Bear Stearns Companies Inc (NYSE: BSC) CEO Jimmy Cayne are looking for a white knight that could surpass JPMorgan Chase & Co's (NYSE: JPM) takeover offer for Bear Lewis and Cayne have reportedly reached out to several private equity firms and overseas banks, including Barclays Plc (NYSE: BCS) and Credit Suisse Group (NYSE: CS).
WEB SITES:
Medical supplies boss Michael Mastromarino, accused of stealing the body parts of around 1,000 corpses, has pleaded guilty to several charges in a deal with prosecutors. The BBC News reported that the Biomedical Tissue Services company shipped bones, skin and tendons to tissue-processing companies such as LifeCell Corporation (NASDAQ: LIFC) and Tutogen Medical Inc (AMEX: TTG), which are in turn facing hundreds of civil lawsuits.
Royal Bank of Canada (NYSE: RY) is expected to launch the first covered bond from the country next week, the Financial Times reported. The bank is targeting a benchmark-sized issue worth $1.4B-$4.2B.
The Financial Times also reported that Indian conglomerate Tata has concluded an agreement with Virgin Mobile USA Inc (NYSE: VM) to launch a cellular phone brand in India. The brand, called Virgin Mobile in India, would target young Indians under a franchise agreement with Tata Teleservices.
WEB SITES:
Bloomberg reported that former JP Morgan Chase & Co (NYSE: JPM) Vice Chairman Donald Layton is expected to be named E*Trade Financial Corporation's (NASDAQ: ETFC) new CEO. In an interview, Layton said he may consider a sale of the troubled online brokerage if it "made sense" for shareholders.
E*Trade (NASDAQ: ETFC) yesterday reported earnings that were received well by investors. E*Trade pretty much kitchen-sinked it and reported an almost $2 billion loss but revealed details about a long-awaited turnaround plan.
E*Trade has been plagued by significant losses due to its exposure to low quality mortgages from E*Trade's banking unit. The losses spiraled into customer defections and a management shake-up which lead to this new turnaround plan.
Most of the loss reported this quarter came from sales of mortgage-related securities that lost a lot of value last year. Things had gotten so bad last November that concerns arose that E*Trade was in danger of insolvency. Hedge-fund giant Citadel invested $2.55 billion in E*Trade and bought its $3 billion asset-backed securities portfolio for a knockdown price of $800 million.
I recently wrote about E*Trade vis-a-vis Ameritrade. Now, it's E*Trade's turn.
Other salient issues surrounding the turnaround plans involve the new CEO, shoring up the balance sheet and Ameritrade's outages and effect on E*Trade.
Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.
For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.
"My top speculative choice for 2008 is E-Trade Financial (NASDAQ: ETFC), a great turnaround story," says Mark Skousen, editor of Forecasts & Strategies and author of the just-published best seller, Investing in One Lesson.
"E-Trade is one of the nation's largest, deep-discount stock brokerages. It provides order placement and execution for stocks, bonds, options, futures, and mutual funds to millions of customers in more than 40 countries worldwide.
"The company has more than $176 billion in customer funds and has won recognition for service, reliability and security.
"Unfortunately, the company recently was caught in the credit crunch, causing its share price to drop 80%. It held billions of dollars worth of risky securities. On November 29, the firm received a $2.5 billion cash infusion from Citadel Investment Group, a hedge fund. (E-Trade CEO Mitch Caplan lost his job as part of the deal.)
Microsoft Corp. (NASDAQ: MSFT) -- Bill Gates will give the pre-show keynote address at CES on January 6th in Las Vegas. CES features 2,700 exhibitors spanning 30 product categories. MSFT overall option implied volatility of 29 is above its 26-week average of 24 according to Track Data, suggesting larger risk.
E-Trade (NASDAQ: ETFC) -- ETFC is recently down 65 cents to $4.04. On November 29, ETFC announced a $2.5 billion cash infusion deal from Citadel Investment Group. Bank of America says: "Downgrade to sell (PT goes to $2) as we no longer believe the value of the ETFC's retail brokerage business, a dwindling asset (which has lost 17% of assets already), can offset negative value at the bank." ETFC overall option implied volatility of 111 is above its 26-week average of 72, according to Track Data, suggesting larger price fluctuations.
Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
According toThe Wall Street Journal "E*Trade Financial (NASDAQ: ETFC), which is ensnared in the mortgage crisis, is getting a $2.55 billion cash infusion from Citadel Investment Group."
Citadel will "purchase E*Trade's entire $3 billion portfolio of asset-backed securities for a value of around $800 million." The balance of the money will go in as 10-year notes with a 12.5% interest rate. Citadel will end up owning 20% of the company and have a seat on the board.
Douglas A. McIntyre is an editor at 247wallst.com.
No one should be surprised; all of the companies looking at buying troubled discount broker E*Trade (NASDAQ: ETFC) are worried about the value of its mortgage business [subscription required], which had huge write-offs in the last quarter and almost certainly has more ahead. The consumer accounts in the core brokerage business are probably worth billions of dollars, but no one wants the mortgage operation as part of a transaction.
E*Trade has a market cap of over $2 billion now, but that number was over $10 billion earlier in the year. According to The Wall Street Journal, the US government could "demand that most of the proceeds of a sale be injected back into E*Trade's bank, leaving little left over for E*Trade's shareholders." It would be hard to take the bank unit and its mortgages and segregate them from the rest of the company so that common shareholders get some return.
What all of this says is that E*Trade may be much better off finding an investor to take part of the company and see if it can use that capital to work its way out of the current mess. If it can, shareholders have the chance to get a lot more than $2 or $3, or maybe less, for their stock.
There is a fund in Dubai looking for new investments. Maybe a struggling US discount broker would fit the bill.
Douglas A. McIntyre is an editor at 247wallst.com.
ETFC announced on November 9 it expected to take significant write-downs in Q4 on its asset backed securities.
ETFC recently announced The Securities and Exchange Commission is conducting an informal inquiry of ETFC loan and securities portfolios.
ETFC December 5, 6 and December 7 call and put option implied volatility of 155 is above its 26-week average of 57, according to Track Data, suggesting option traders are initiating the purchase of options as a hedge to potential price fluctuations.
TheStreet.com's Jim Cramer says if any of your holdings in this sector have too much of any one kind of credit, use current market strength to sell.
Getting our arms around the problem. That's the real way we get closure on this credit problem. That's why the market was able to rally Tuesday, even though no one says the problem is getting better.
At last we're just trying to figure out how bad it can be because we know it is worse than the $42 billion that has already been charged off in subprime. By the way, even that figure, which seems staggeringly high, is only a fraction of the $250 billion minimum number I am using.
What's so maddening is that there isn't one kind of debt problem. There are three kinds of debt, with a subset for the worst kind. You have to run the gauntlet of all three kinds if you are going to be blessed by the market. And so far, only Goldman (NYSE: GS) (Cramer's Take) has done that.
MOST NOTEWORTHY: Occam Networks, Washington Mutual, Downey Financial and IMS Health were today's noteworthy downgrades:
Merriman downgraded shares of Occam Networks (NASDAQ: OCNW) to Neutral from Buy as they believe the company's restatement filing raised more questions than it answered and that the company's takeout value is shrinking.
Friedman Billings downgraded Washington Mutual (NYSE: WM) and Downey Financial Corporation (NYSE: DSL) to Underperform from Market Perform based on credit trends that are eroding faster than anticipated in the housing market.
William Blair downgraded IMS Health (NYSE: RX) to Market Perform from Outperform following the lower than expected Q3 results to reflect deterioration in the company's market environment. Shares were also downgraded to Sell from Neutral at Goldman Sachs.
MOST NOTEWORTHY: EDO Corp, General Motors, Cameron, Getty Images and Micrus Endovascular were today's noteworthy downgrades:
EDO Corporation (NYSE: EDO) was downgraded to Neutral from Outperform at Credit Suisse following the acquisition by ITT Corporation (NYSE: ITT). Shares were also downgraded to Market Weight from Overweight at Thomas Weisel and to Hold from Buy at B&T Capital.
Goldman downgraded shares of General Motors Corporation (NYSE: GM) to Neutral from Buy to reflect risk to the company's international and the slowing U.S. economy. Further, Goldman believes expectations for a deal over healthcare costs with unions are now priced into the stock.
Wachovia downgraded Cameron International (NYSE: CAM) to Market Perform from Outperform on valuation.
Kaufman Bros. downgraded shares of Getty Images Inc (NYSE: GYI) to Sell from Hold to reflect reduced expectations following the company's announced price reductions.
CIBC downgraded shares of Micrus Endovascular Corporation (NASDAQ: MEND) to Sector Performer from Outperformer following the company's lowered guidance..
E-Trade (NASDAQ: ETFC) put volume & volatility at Panic levels on sell-off. ETFC is recently down $3.28 to $10.60. SBSH said on 8/12 "Disclosure in 10-Q short on substance from our viewpoint. Mgmt provided minimal new information on the composition of its $28 billion mortgage portfolio." ETFC call option volume of 37,882 contracts compares to put volume of 87,399 contracts. ETFC September option implied volatility of 210 is above its 26-week average of 37 according to Track Data, suggesting large price fluctuations.
Countrywide Financial - (NYSE: CFC) put volume & volatility Spike; indicating Crisis. CFC, a home mortgage lender, is recently down $4.18 to $17.13. CFC announced "it has supplemented its funding liquidity position by drawing on an $11.5 billion credit facility." Moody's Investors Services downgraded CFC rating to Baa3. CFC call option volume of 204,765 contracts compares to put volume of 412,286 contracts. CFC September option implied volatility of 210 is above its 26-week average of 56 according to Track Data, indicating larger price fluctuations.
EMC (NYSE: EMC) implied volatility Elevated at 53 into VMware IPO. EMC closed Friday at $17.72. VMware, an EMC company, is the global leader in virtual infrastructure software for industry standards. VMware is expected to be spun out of EMC this week. Morgan Keegan said on August 10, "We estimate a fair value range of $18.90-$25.33 for EMC shares. This range assumes $12.90 per share for the core EMC business and $6.00-$12.43 per share for VMware." EMC September option implied volatility of 53 is above its 26-week average of 28 according to Track Data, suggesting larger risk.
E-Trade (NYSE: ETFC) volatility Elevated on concerns of mortgage portfolio. ETFC closed Friday at $17.01. Smith Barney says, "Disclosure in 10-Q short on substance from our viewpoint. Management provided minimal new information on the composition of its $28 billion mortgage portfolio." ETFC overall option implied volatility of 55 is above its 26-week average of 35 according to Track Data, suggesting larger price fluctuations.
Daily options update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
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Microsoft Corp.
TheStreet.com's Jim Cramer says if any of your holdings in this sector have too much of any one kind of credit, use current market strength to sell..gif){kind=logo}
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