TD Ameritrade Scores Big

Tuesday's big score at TD Ameritrade(AMTD Quote) has investors expecting big things out of the online brokerage stocks.

Buoyed by Ameritrade's 69% rise in fiscal first-quarter profit, shares in rival E*Trade(ETFC Quote) rose Tuesday. Fans are betting the online trader will match Ameritrade's gains when it reports quarterly earnings later this week.

The news comes as Wall Street takes another look at the sector, which has languished over the last five years. Until recently, small investors had lost their taste for the market as stocks flatlined and real estate prices soared.

But now, with the Dow hitting new highs almost daily and the Nasdaq finally breaking out of a six-year-long slump, investors are starting to reassess the prospects of these companies.

"The retail investor is coming back and the online brokers are the most pure-play means to invest in this trend," Prudential analyst Mike Mayo said during a recent conference call. "Profit margins at the online brokers are double the full service players. They're more online. They have less infrastructure."

The analysts expect 10% growth in net new asset at Schwab (SCHW Quote) this year, leading to 20% earnings growth. They also predict 30% growth in new deposits at E*Trade. Prudential Equity Group calls the online brokers a top pick this year.

Schwab is set to report fourth-quarter earnings on Wednesday, and E*Trade will report on Thursday.