On Sep 27, 2013, we downgraded our recommendation on
TD Ameritrade Holding Corporation
) to Neutral from Outperform based on the current volatile
trading volumes amid uncertain markets. Nevertheless, the company
is focused on improving its trading and investing business
through product innovation, new IDA agreements to mitigate the
regulatory impact, advanced customer service as well as expense
Due to a sluggish macroeconomic environment, trading volumes at
TD Ameritrade remained volatile in the recent period. Notably, in
July, average client trades declined as compared to June, while
it improved in August from the prior month.
Moreover, the company recorded higher average client trades
per day for the 9 months ended Jun 30, 2013 compared to the
prior-year period, owing to a modest improvement in equity
markets. However, we believe trading will remain under pressure
in the near term.
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Since 2010, TD Ameritrade has countered several headwinds such as
a low interest rate environment, which weighed on expansion and
net interest income. Even though interest rates are rising,
global macroeconomic uncertainty kept many retail investors away
from the market and continued to exert pressure on the real
However, TD Ameritrade remains a leading asset gatherer with four
consecutive years of double-digit annualized growth since 2008 in
net new client assets. An increase in funded accounts and
expansion in the RIA servicing business were the primary factors
that led to the growth in organic assets.
Moreover, the company reported fiscal third-quarter 2013 (ended
Jun 30, 2013) earnings of 33 cents per share, beating the Zacks
Consensus Estimate by 2 cents. Better-than-expected results came
on the back of higher revenues.
For TD Ameritrade, the Zacks Consensus Estimate for 2013 surged
7.1% to $1.20 per share, over the last 90 days. For 2014, the
Zacks Consensus Estimate increased 7.3% to $1.32 per share, over
the same time frame. TD Ameritrade currently carries a Zacks Rank
Other Stocks to Consider
Other financial stocks that are worth considering include
GAIN Capital Holdings, Inc.
) with a Zacks Rank #1 (Strong Buy), while
The Charles Schwab Corp.
) carry a Zacks Rank #2 (Buy).