Nomura Securities Initiating Coverage of the Online Brokers: Positive Secular Drivers Overshadowed by Low Rates
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Price: $0.76 +2.70%
Rating Summary:
4 Buy, 18 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 10 | Down: 12 | New: 20
Rating Summary:
4 Buy, 18 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 10 | Down: 12 | New: 20
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Nomura Securities Initiating Coverage of the Online Brokers: Positive Secular Drivers Overshadowed by Low Rates
Starts coverage on TD Ameritrade (Nasdaq: AMTD)(Neutral, TP $17), E*TRADE (Nasdaq: ETFC)(Buy, TP $10) and Schwab (Nasdaq: SCHW)(Neutral, TP $12).
Analyst, Keith Murray, said, "Secular trends should enable the online brokers to continue gathering assets: (1) growth in Internet and mobile usage; (2) growth in household financial assets (approximately $26tn at the end of 2010); and (3) continued growth in the independent advisor space (SCHW and AMTD are best positioned)."
"With interest rates not expected to rise until at least mid-2013, we anticipate further NIM compression, which will keep earnings from growing in 2012 for Schwab and TD Ameritrade (we think E*TRADE’s EPS could improve as credit costs head lower). The stocks move with changes in rates, and SCHW is most exposed with an 81% R-squared vs. the 10-year Treasury."
"Valuation: Online Brokers Are Trading at a Slight Premium to Asset Managers - On an absolute basis, the online brokers appear undervalued on forward earnings, as the group median P/E is 12x, well below its historical average. In addition, the online brokers are currently trading at a smaller premium to the S&P 500 than they have in the past. While the group, on average, does appear attractively valued, we note that Schwab and TD Ameritrade are trading above the median and that E*TRADE is trading well below the median. Relative to other financials, we think the online brokers deserve to trade at a premium to the brokers, universal banks and trust banks. However, we see better value in the asset
managers, as they are trading at a 3% discount to the online brokers on 2012 EPS estimates and are less rate-sensitive."
Other Highlighted Points Include: 1) We Do Not Expect Much Growth in Trading Revenue; and 2) SCHW and AMTD Have Better Franchises, but ETFC Is Our Top Pick
Starts coverage on TD Ameritrade (Nasdaq: AMTD)(Neutral, TP $17), E*TRADE (Nasdaq: ETFC)(Buy, TP $10) and Schwab (Nasdaq: SCHW)(Neutral, TP $12).
Analyst, Keith Murray, said, "Secular trends should enable the online brokers to continue gathering assets: (1) growth in Internet and mobile usage; (2) growth in household financial assets (approximately $26tn at the end of 2010); and (3) continued growth in the independent advisor space (SCHW and AMTD are best positioned)."
"With interest rates not expected to rise until at least mid-2013, we anticipate further NIM compression, which will keep earnings from growing in 2012 for Schwab and TD Ameritrade (we think E*TRADE’s EPS could improve as credit costs head lower). The stocks move with changes in rates, and SCHW is most exposed with an 81% R-squared vs. the 10-year Treasury."
"Valuation: Online Brokers Are Trading at a Slight Premium to Asset Managers - On an absolute basis, the online brokers appear undervalued on forward earnings, as the group median P/E is 12x, well below its historical average. In addition, the online brokers are currently trading at a smaller premium to the S&P 500 than they have in the past. While the group, on average, does appear attractively valued, we note that Schwab and TD Ameritrade are trading above the median and that E*TRADE is trading well below the median. Relative to other financials, we think the online brokers deserve to trade at a premium to the brokers, universal banks and trust banks. However, we see better value in the asset
managers, as they are trading at a 3% discount to the online brokers on 2012 EPS estimates and are less rate-sensitive."
Other Highlighted Points Include: 1) We Do Not Expect Much Growth in Trading Revenue; and 2) SCHW and AMTD Have Better Franchises, but ETFC Is Our Top Pick
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