E*Trade Group Inc. has seen its stock rise since early October at twice the pace of rival brokers Charles Schwab and Ameritrade Holding, a tribute to a national advertising campaign and investor appetite for companies doing business on the Internet.
According to Bloomberg News, since Oct. 8, when the Nasdaq Composite index hit a 16-month low, E*Trade, the No. 2 online brokerage after Schwab, is up 130 percent, while Ameritrade is up 66 percent. Schwab is up 62 percent, and the Nasdaq index is up 40 percent in the same period. E*Trade closed last at about $29.19.
Almost all E*Trade’s investors trade online, while only about half of Schwab’s volume is done electronically. In September, E*Trade began a $100 million, 12-month advertising campaign. Since then, the stock has gained from a surge in shares of Internet companies and increased stock market trading volume.
“E*Trade’s much more stable than most Internet stocks–they’re actually doing business, and they can make a profit if they choose by reducing ad spending,” said Linda Chew, an analyst with New York money manager Corinthian Partners.
Bloomberg said Chew placed a “buy” rating on the stock April 23 at 22 9/16, with a price target of 32 to 33, and said she will revisit the earnings model to see if she’ll increase that target price.
E*Trade lost $1.3 million, or 3 cents a share, for the fiscal year ended Sept. 30. The company is expected to lose 44 cents a share in fiscal 1999, largely because of ad spending, and earn 54 cents in 2000, according to 11 analysts surveyed by First Call Corp.
The rise in E*Trade’s stock is “a response to the tremendous amount of advertising they’ve been doing,” said James Marks, an analyst with Deutsche Bank Securities. Ameritrade stock had a similar rise a year earlier, when it started a $50 million ad campaign, Marks said.
Lisa Nash, vice president for customer management at E*Trade said that “substantially the largest chunk” of the company’s ad spending dollars are being spent on the Internet.