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Ameritrade Holding Corp. (Nasdaq: AMTD) dropped 1/4 to 8 9/16 Monday after Robertson Stephens analyst Scott Appleby lowered his revenue forecast for the online brokerage company.
"Based on continued market weakness and the degree to which the market has fallen, we have become very cautious on the entire e-brokerage sector," said Appleby, who continues to rate Ameritrade a buy.
"Following the 1987 decline, it took four years for volumes to recover to 1987 levels," said Appleby in a research note. As a result, he said, revenue for fiscal 2001 will be about US$627 million, well below the $907 million previously expected.
Appleby also lowered his estimate of Ameritrade's earnings per share for the year to 28 cents from 70 cents. Operating income, excluding the company's onMoney division, is likely to be 28 cents per share, he said.
"Despite our concerns regarding the December quarter, Ameritrade continues to be the low-cost provider for online brokerage services, and should go on benefiting from its market positioning," Appleby wrote. Any improvement in the stock market should help the company's shares, he said, as "large broker-dealers have historically outperformed the Nasdaq following market corrections."
Appleby also lowered his revenue and earnings projections for Ameritrade rival Knight Trading Group, Inc. and E*Trade Group, Inc., citing a weak stock market. Yet he remained optimistic about the companies, and about the sector in general.
"While we believe that it is too early to call the end of this correction,
we believe that the market is nearing the trough," Appleby wrote. The next
four to six weeks could present a "compelling" case for buying online
brokerage stocks, he said.
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