SmartMoney Full Banner 468 x 60

Enter your email address:

Delivered by FeedBurner

>> Bookmark This Site!


Search Site


Recent Posts

  • Featured Sites

  • Stock Blogs


    « | Home | »

    E*Trade A Bargain?

    By Stock Charts | November 14, 2007

    E*Trade Financial (ETFC) posted a letter to its users on Monday that sparked a free fall in its stock. Here’s a copy of the letter:

    To all E*TRADE FINANCIAL customers:

    November 12, 2007

    This is a challenging time for the financial services industry. Bad news in the credit, housing, and stock markets continues to dominate and E*TRADE is not immune to these market conditions.

    However, you, our customers, should know that we continue to be well capitalized by regulatory standards. As a matter of fact, we could absorb an immediate write down in excess of $1 billion and still remain well capitalized. Nobody knows for certain what the ultimate impact will be from these markets, but it is our expectation that news in the market will get worse before it gets better and, armed with these expectations, we are taking prudent measures to effectively manage the company’s balance sheet.

    We will continue to earn your confidence, providing state-of-the-art asset protection, including E*TRADE’s Complete Protection Guarantee, SIPC Protection for E*TRADE Securities customers and FDIC Insurance for E*TRADE Bank customers.

    We appreciate the opportunity to continue to serve you and your investing needs.

    This announcement comes on the heels of writedowns by almost every brokerage and large banks tied to mortgage lending or mortgage backed securities.

    No doubt, E*Trade is in a sticky situation. Can they prevent customer from withdrawing their money and switching brokerages? Can the brokerage division make money fast enough to counter losses from the banking division? It’s impossible to say at this point. However, one thing is true: at a stock price of ~$5, E*Trade is exceedingly cheap, with a valuation of $1.5 billion. Even if E*Trade does end up becoming under capitalized, I believe that it will become bought out before it goes bankrupt, and after the dust settles the stock should recover, to some extent. Fundamentally, E*Trade is a profitable company and if it can weather this particular storm, a recovery should be imminent.

    ETFC Stock Market Chart

    Of course this is my personal opinion. Keep in mind that E*Trade is very volatile at the moment and is quite a risky investment.

    For more stock news and chart analysis, subscribe to my RSS feed, or stock newsletter:

    Related Posts:

    Topics: Stock Charts | 1 Comment »

    One Response to “E*Trade A Bargain?”

    1. Dan Says:
      November 18th, 2007 at 11:45 pm

      Buying E-Trade here is really only play on whether or not it gets bought out. At this point, there’s just not enough data out there to make an educated guess as to whether the company will salvage its operations. I’d stay away.