Will real Ameritrade please stand up?
up on bank deal, but analyst views are
By Emily Church, CBS MarketWatch
8:21 PM ET Nov 16, 1999 Also: NewsWatch
YORK (CBS.MW) -- Ameritrade's stock rose 16 percent
Tuesday on renewed talk that the online brokerage is an
acquisition candidate and with a little help for the
financial group from the Federal Reserve.
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The stock (AMTD: news, msgs) also
continues to post gains from Ameritrade's new alliance with
Schwab (SCH: news, msgs) and TD Waterhouse (TWE: news,
msgs) in an as-yet-unnamed Internet investment bank and
on expectations for strong commission revenue from a
banner November in the markets, said Greg Smith, analyst
at Hambrecht & Quist.
The Fed's switch
Tuesday afternoon to a neutral "bias" on interest rates
lifted the entire sector and particularly the brokerage
group ($XBD: news, msgs). See related
At the same time, however, Wall
Street is giving investors a mixed picture on the
company. CIBC World Markets analysts on Tuesday started
coverage of the Omaha, Neb., discount broker with a "hold"
recommendation, tipping the scales toward caution. Of the 11
analysts covering Ameritrade, six now have "holds" on the
stock and five are recommending it as a "buy,"
according to First Call.
CIBC said Ameritrade's
deep-discount model on the Web, at $8 a trade, had the "weakest
prospects" for strong growth. The bank is looking at the
sector to turn its focus from increasing new accounts to
maintaining "high quality," presumably asset-laden,
"With almost all of the hyperactive traders already on
the Web, future customer growth at Ameritrade might
be strong, but those new customers will trade at
levels below the company's current high average,"
analyst Amar Mehta told clients.
York bank also started E-Trade (EGRP: news, msgs) at
"hold" and TD Waterhouse (TWE: news, msgs) at "strong
Other analysts are more bullish on Ameritrade. Scott
Appleby at Robertson Stephens rates the stock "buy" and
said on Monday that his investment bank "especially
likes Ameritrade for valuation purposes." He's
expecting 100 percent growth in online brokerage accounts
over 1998, based on industry account growth far
exceeding estimates for the December quarter, and coming in
around 1 million new accounts.
Meanwhile, analyst Richard Zandi of Salomon Smith Barney, in
a note to clients Tuesday, said the Internet
investment bank announcement on Monday "appears to us to be
a precursor to consolidation."
"We view it as evidence of the belief, particularly
by Schwab, that the advantages of scale are too
compelling to risk losing by going at it alone. However, it
may also be an indication that current valuations are
prohibitively rich to afford outright
Ameritrade ended up 4 5/16 to 30 3/4, while E-Trade rose 1
1/16, or 2.8 percent, to 39 3/16 and TD Waterhouse rose
1 3/8, or 7.2 percent, to 20 3/8. Charles Schwab,
the largest online broker, rose 1 3/8, or 3.1
percent, to 46 1/8.
Ameritrade officials late
Tuesday declined to comment on the recent movement in
their company's stock.
amar mehta says no new active traders i say
bullshit. two years ago i traded 10 times a year, mow i
trade 10 times a week. my business partner who got
tired of me running in and saying i just made another
?$, finally got on and he trades more than me with a
lot less money. i put on classes and although i give
my clients the choices i say i usually use
its all about creating demand. amtd will not put mer
out of business, it will overwhelm them in the amount
of business it does. mer used to be known as the
thundering herd because they catered to the little guy. they
forgot their roots. but again, we wont bring them down
we will overwhelm them. when the markets are trading
10 or 20 billion shares a day in a few
years, there will be room for mer to grow but can u even
imagine how many of those trades will be done by amtd.
....because of their own arrogance. They will rot
and I will enjoy watching the biggest scums on the
market fall on their face.
Merrill figured they
could come late to the game and everyone would jump
ship. The problem is a) they cater to different
clientele, clientele that want 10-12% a year safely and DONT
want to trade online, and b) old habits die hard, as
Microsoft found out with IE. People like and use Netscape
(including me) even though its an inferior browser, because
people have grown up on Netscape. Only within the past
year after many years has Microsoft started to win the
I also have a two friends at Merrill. They have
their concerns as well, like their role and their
Do remember we're in the minority doing online
trading, and despite what any anal-yst says or any astral
projections or tea leaves these people claim to posess, it
will stay that way for this generation. Old habits die
investment bank alliance, and the new legislation
allowing financial mergers, along with record trading and
highs is driving this stock higher...It looks like a
gap up again tommorrow, making 3 gaps in a row, also
AMTD closes strong each day, showing real demand! This
is the strongest OLB in the whole sector right now,
and the shorts will feel the pain and drive it even
higher. AMTD probably will be over 100 in 2 or 3