FBR Capital on Financial Institutions: Don't "Discount" the Brokers Amidst the March Madness
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Price: $0.83 +12.16%
Rating Summary:
4 Buy, 18 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
Rating Summary:
4 Buy, 18 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
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FBR Capital on Financial Institutions: Don't "Discount" the Brokers Amidst the March Madness
FBR analyst says, "We are transferring coverage of TD Ameritrade Holding Corp. (Nasdaq: AMTD), E*TRADE Financial Corp. (Nasdaq: ETFC), and Charles Schwab Corp. (Nasdaq: SCHW) from Matt Snowling to Michael Tarkan due to a reallocation of resources at FBR. We remain at Outperform on AMTD and ETFC, and Market Perform on SCHW. Amidst the recent political and geographic turmoil overseas, driving the market pullback thus far in March, we believe investors now have a compelling entry point into the online or "discount" brokerage sector. At current levels, we find the brokers attractive among other financials as they should continue to produce steady organic asset and earnings growth, return meaningful levels of capital to shareholders, have limited credit risk, and benefit from increased volatility. Although asset management fees would come under pressure in a more prolonged downturn, and the duration of the low interest rate environment would likely be extended, we believe net interest margin (NIM) is bottoming out across the group given that the fed funds rate has remained near zero since the end of 2008. As a result, we see more limited downside from current levels. From a stock perspective, although we have a favorable opinion on the overall industry, we see better value among AMTD and ETFC due to catalysts, outside of rate hikes, that can materialize over the next 12 months. We believe SCHW remains more of an interest-rate play, and given that we do not expect meaningful rate hikes anytime soon, we see better opportunities for outperformance elsewhere."
"AMTD is our top pick. We rate AMTD an Outperform with a $25 price target and EPS estimates of $1.10 for FY11 and $1.40 for FY12, versus consensus of $1.13 and $1.41, respectively."
"E*TRADE credit improvement is still on the horizon. We rate ETFC an Outperform with an $18 price target and EPS estimates of $0.50 for FY11 and $0.95 for FY12, versus consensus of $0.60 and $1.01, respectively."
"We like SCHW, but we’re not a buyer yet. We rate SCHW a Market Perform with a $19 price target and EPS estimates of $0.75 for FY11 and $1.05 for FY12, versus consensus of $0.82 and $1.15, respectively."
FBR analyst says, "We are transferring coverage of TD Ameritrade Holding Corp. (Nasdaq: AMTD), E*TRADE Financial Corp. (Nasdaq: ETFC), and Charles Schwab Corp. (Nasdaq: SCHW) from Matt Snowling to Michael Tarkan due to a reallocation of resources at FBR. We remain at Outperform on AMTD and ETFC, and Market Perform on SCHW. Amidst the recent political and geographic turmoil overseas, driving the market pullback thus far in March, we believe investors now have a compelling entry point into the online or "discount" brokerage sector. At current levels, we find the brokers attractive among other financials as they should continue to produce steady organic asset and earnings growth, return meaningful levels of capital to shareholders, have limited credit risk, and benefit from increased volatility. Although asset management fees would come under pressure in a more prolonged downturn, and the duration of the low interest rate environment would likely be extended, we believe net interest margin (NIM) is bottoming out across the group given that the fed funds rate has remained near zero since the end of 2008. As a result, we see more limited downside from current levels. From a stock perspective, although we have a favorable opinion on the overall industry, we see better value among AMTD and ETFC due to catalysts, outside of rate hikes, that can materialize over the next 12 months. We believe SCHW remains more of an interest-rate play, and given that we do not expect meaningful rate hikes anytime soon, we see better opportunities for outperformance elsewhere."
"AMTD is our top pick. We rate AMTD an Outperform with a $25 price target and EPS estimates of $1.10 for FY11 and $1.40 for FY12, versus consensus of $1.13 and $1.41, respectively."
"E*TRADE credit improvement is still on the horizon. We rate ETFC an Outperform with an $18 price target and EPS estimates of $0.50 for FY11 and $0.95 for FY12, versus consensus of $0.60 and $1.01, respectively."
"We like SCHW, but we’re not a buyer yet. We rate SCHW a Market Perform with a $19 price target and EPS estimates of $0.75 for FY11 and $1.05 for FY12, versus consensus of $0.82 and $1.15, respectively."
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