Bull of the Day: TD Ameritrade (AMTD) - Bull of the Day
March 03 2014 - 3:43AM
Zacks
After a small hiccup, markets are again back on track with the
S&P 500 now posting a modest gain for the first two months of
the year. This quick rebound, coupled with the impressive stock
market performance last year, is slowly beginning to draw more
retail investors back to equities.
This is especially the case as the 30 year bond bull market ends,
producing losses in bond portfolios for the first time in memory.
These losses in bond funds and the strong stock market are the
catalyst for more retail interest in the space, which is
undoubtedly great news for the online brokerage community which
caters to this group.
Companies in this space are seeing asset levels soar and trading
orders rise too. This is greatly helping their bottom lines, and it
is making an investment in the brokerages an intriguing idea,
particularly if the current trends in the market continue. While
there are a number of companies that focus on this market, one
excellent option is
TD Ameritrade (AMTD).
AMTD in Focus
TD Ameritrade is an Omaha based online broker, allowing retail
investors to purchase and sell a variety of securities including
stocks, preferred stock, mutual funds, ETFs, and options, just to
name a few. The firm has grown into a giant in the space, as it now
has close to six million funded customer accounts with client
assets approaching half a trillion dollars.
As you might expect, TD Ameritrade makes a sizable amount of its
revenues from commissions, and with more interest in the market,
the total amount of trades are soaring. However, AMTD actually
makes just over half of its revenues from items like interest
revenue and insured deposit account fees, and with investors piling
capital into their online accounts, these revenues look likely to
increase too.
Thanks to this trend, AMTD has had an easy time in beating
estimates at earnings season, beating by about 6% on average over
the last four quarters. And with these trends likely to continue in
the space, analysts have been raising their earnings estimates as
of late, suggesting that the picture is definitely improving for
AMTD.
Earnings Estimates
In the past two months, earnings estimates have been moving
universally higher for AMTD. Not a single estimate in our consensus
has gone lower in the time frame, including 11 estimates moving
higher for the current year earnings, and eight moving higher for
next year’s earnings forecast.
These revised estimates have pushed the current year consensus up
from earnings of $1.34/share 60 days ago, to $1.41/share today.
Thanks to these moves, AMTD is now projected to have year-over-year
earnings growth of 15% for the current year, and just under 20%
growth for next year, meaning that the there is still plenty left
in AMTD’s growth story, and that if anything, it is only going to
get better with time.
Bottom Line
Due to these factors, it is shouldn’t be too surprising to note
that AMTD has a Zacks Rank #1 (Strong Buy) and that we are looking
for outperformance from this company in the weeks and months
ahead.
And while the broad investment broker industry is highly ranked
too, AMTD clearly stands out thanks to its growth trajectory, brand
name, and rising estimates, suggesting this firm is the crème of
the crop in this important market segment.
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