E TRADE Financial Corporation (ETFC) Stock Is Counting on Investors

Page 1 of 2

As a major discount broker, E TRADE Financial Corporation (NASDAQ:ETFC) helps investors seek their fortune in the stock market. But for shareholders in E*TRADE stock to benefit, what they need is for investors to feel confident enough about the stock market’s prospects that they open new brokerage accounts and make more stock trades. With its stock up of over 50% just since November, E TRADE Financial Corporation (NASDAQ:ETFC) is clearly counting on investor optimism to drive its financial results higher. Let’s take a look at what’s behind E*TRADE’s big move.

E TRADE Financial Corporation (NASDAQ:ETFC)

The carnage of the market meltdown
E TRADE Financial Corporation (NASDAQ:ETFC)’s past has been pretty ugly over the past several years, as the brokerage industry has suffered from the shell-shocked reaction that investors had following the financial crisis. Even as stock markets advanced, many investors remained on the sidelines, and that caused problems for players throughout the industry. As you can see below, peers Charles Schwab Corp (NYSE:SCHW) and TD Ameritrade Holding Corp. (NYSE:AMTD) have both joined E TRADE Financial Corporation (NASDAQ:ETFC) in lagging behind the performance of the broader market since mid-2009.

ETFC Total Return Price Chart

Brokers Total Return Price data by YCharts.

In addition to tepid levels of activity among investors, brokers also face the difficulty that low interest rates present. During ordinary times, brokers are able to make money from the cash balances their customers keep on hand. But with rates so low, Schwab, Vanguard, Fidelity, and other brokers have had to subsidize their money market funds, and while E*TRADE has largely turned to its banking subsidiary as a cash option for its customers, rates nevertheless affect its ability to profit as well.

What’s especially hurting E*TRADE
However, E TRADE Financial Corporation (NASDAQ:ETFC)’s stock price reflects even worse performance than that of its peers. In its most recent quarter, E*TRADE’s revenue fell short of expectations, with a 5% drop in daily average revenue trades. The number of new brokerage accounts it opened fell by more than a third from the year-ago quarter. Monthly activity in April was equally weak, with daily average revenue trades falling 3% from the year-ago month. That’s alarming news given the huge run-up the stock market has had, which ordinarily would have stoked greater enthusiasm already among potential and current customers.

That performance has led a vicious circle for the stock, as key investors have lost confidence in the company’s ability to recover further. For instance, in March, Citadel Equity Fund sold off its nearly 10% stake in E*TRADE through a secondary offering, taking advantage of the recent jump in the stock to sell out.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!