E*Trade Group, Inc. (Nasdaq: EGRP) rose 2 3/8 to 19 1/4 Wednesday after analyst Richard Zandi at Donaldson, Lufkin & Jenrette, in beginning coverage of nine online brokers, rated the stock his top pick.
“E*Trade has been a juggernaut,” Zandi wrote in a research report. “The secular growth trends are all in E*Trade’s favor, the market opportunity is huge, and we expect E*Trade’s suite of products and services to sustain continued rapid growth.”
E*Trade and other online brokers have seen their stock prices languish in recent weeks, partly because of the perception that a slowdown in the economy could lead to a decline in the rate of trading growth. Zandi said E*Trade shares, at current levels, already reflect “dire outcomes.”
Zandi expects the company — the second-largest online broker after Charles Schwab — to be one of a “few winners” as the market settles. “We believe that E*Trade is well along in creating a footprint broad and deep enough to be among the few new-economy financial service vendors that will successfully emerge as a complete-service global financial services franchise,” he wrote.
E*Trade has begun to expand beyond online trading. Two weeks ago, the company announced a joint venture with financial services firm Ernst & Young that will provide E*Trade clients with access to personal financial advice, either online or in person. It also offers banking services and FDIC-insured products through its E*Trade Bank unit.
“We caution investors that to the extent that market volumes decline further than expected or we remain in bear territory, E*Trade may give up more ground,” Zandi said in the report. “If it does, buy the stock!”
Zandi has a 12-month price target for E*Trade of $31 per share.
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