On Aug 29, 2013, we upgraded our recommendation on
TD Ameritrade Holding Corporation
) to Outperform from Neutral, based on its strong asset gathering
capabilities that led to growth in market fee-based revenues. The
company's impressive fiscal third-quarter earnings also
stimulated the upgrade.
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
behind growth in organic assets.
With a strong financial position and solid cash flow, TD
Ameritrade enjoys flexibility in returning capital to
shareholders and investing in future growth. We expect such
deployment activities to continue enhancing investors' confidence
in the stock.
Moreover, TD Ameritrade's association with TD Bank provides an
opportunity for both firms to cross-sell products. Even though TD
Ameritrade operates mainly as an online broker, the collaboration
with TD Bank allows it to have a physical presence in the bank
For TD Ameritrade, the Zacks Consensus Estimate for both 2013 and
2014 remains unchanged at $1.19 and $1.31 per share,
respectively, over the last 30 days.
However, regulatory issues pose a headwind to the company. The
Dodd Frank Act and the limitations imposed by regulations of the
Federal Reserve System and Financial Industry Regulatory
Authority are expected to increase the cost of compliance for the
company. Laws and regulations related to the Internet and
safeguarding practices can negatively impact its business as
well. Additionally, the sluggish macroeconomic environment will
likely limit trading activity and weigh on TD Ameritrade's
Other Stocks to Consider
TD Ameritrade currently carries a Zacks Rank #1 (Strong Buy).
Other financial stocks worth consideration include
GAIN Capital Holdings, Inc.
). All these carry the same Zacks Rank as TD Ameritrade.
TD AMERITRADE (AMTD): Free Stock Analysis
BANNER CORP (BANR): Free Stock Analysis
GAIN CAP HLDGS (GCAP): Free Stock Analysis
PREFERRED BANK (PFBC): Free Stock Analysis
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