long Etrade

S

seauouch

Anyone else think Etrade is a good risk/reward play?

They got crushed when they decided to get into the banking business & their banking division is a huge drag on their very profitable brokerage. Etrade has currently written off 75% off their projected loan losses & are fairly well capitalized with 2 billion in cash to write off future losses. In their most recent CC Don Layton ( ceo ) said loss provisions had peaked in Q3 2008 & should be less going forward. Etrade is no longer lending & the majority or their loan portfolio will be run off within 5 years.


As of today their stock price is $1.22 with a market cap of around 600m. Annual profits from the brokerage is around 700m. IF they can survive the loan losses the stock should pop up to $6-10 when the market begins to price the company based on their brokerage business.

Thoughts?
 
Quote from seauouch:

Anyone else think Etrade is a good risk/reward play?

They got crushed when they decided to get into the banking business & their banking division is a huge drag on their very profitable brokerage. Etrade has currently written off 75% off their projected loan losses & are fairly well capitalized with 2 billion in cash to write off future losses. In their most recent CC Don Layton ( ceo ) said loss provisions had peaked in Q3 2008 & should be less going forward. Etrade is no longer lending & the majority or their loan portfolio will be run off within 5 years.

As of today their stock price is $1.22 with a market cap of around 600m. Annual profits from the brokerage is around 700m. IF they can survive the loan losses the stock should pop up to $6-10 when the market begins to price the company based on their brokerage business.

Thoughts?
More...

It's a bad business to be in right now. Would not touch it. They paid too much for JPM's Brownco, and Brownco's customers disserted. That's just one of the things that got them into trouble. Considering all the bad business decisions of the past what gives you confidence they won't be just as hopeless in the future? Also, CEO is probably lying. They should be allowed to twist slowly in the wind until dead. Just my, not too well informed, opinion.
 
Have a few hunnerd as a lottery tkt. If it works fine, if not, no biggie. Of course, now that I own a bit, I'm inclined to think they survive, if for no other reason than that billiuns and billiuns of green confetti are being showered on banks of all sizes and description.
Might work, might not.
 
Quote from piezoe:

It's a bad business to be in right now. Would not touch it. They paid too much for JPM's Brownco, and Brownco's customers disserted. That's just one of the things that got them into trouble. Considering all the bad business decisions of the past what gives you confidence they won't be just as hopeless in the future? Also, CEO is probably lying. They should be allowed to twist slowly in the wind until dead. Just my, not too well informed, opinion.
More...

Well the former CEO was the one who derailed the company with horrible business decisions. New CEO has been doing a good job ( imo ) getting the company turned around. They were the 1st financial firm to admit the problem ( sub-prime meltdown ) & have been aggressively raising cash before the crisis got into full swing. CEO could be lying as you say but having listened to the last 4 CC's the most recent was the only one that had a positive tone, the previous 3 he didnt sugar coat how bad their situation was.

They also sold thier ECanada brokerage to Bank of Nova Scotia for 500m a few months ago ( around 2500 per account ) so I think Etrade would be worth considerably more in any buyout scenerio.
 
Good short term trade if the financials go up. But.

Etrade has applied to the Tarp, but even they are confident they get it, many doubt this. If they will not get this , i think they will go belly up.
 
You must log in or register to reply here.
Back
Top