E*Trade Deal Talk Overdone, Analyst Says

NEW YORK (TheStreet) -- E*Trade (ETFC)'s stock price has shown a propensity to swing wildly on hopes it will eventually be sold to a competitor -- TD Ameritrade (AMTD) is most frequently mentioned -- but an analyst following the company believes the latest round of deal chatter is overdone.

The most recent buzz was came from comments by TD Ameritrade CEO Fred Tomczyk at a Reuters conference in mid-November. Tomczyk said an acquisition was "the best use" for TD Ameritrade's sizeable cash pile, and that the company would be interested in acquiring E*Trade, but that such a deal would have to be "on the right terms with the right structure."

A TD Ameritrade spokeswoman later told TheStreet the quote was taken out of context, and Hecht says he believes the quote was "blown out of proportion."

"He's consistently said he'd love to buy E*Trade if he could just buy the retail business and not assume any of the issues at the bank," JMP Securities analyst Michael Hecht says of Tomczyk. Other analysts have also thrown cold water on the speculation .

Hecht says he gets far more calls from investors interested in E*Trade's stock than he does for any of the other companies he covers, a list that includes large institutional securities firms like Goldman Sachs (GS) as well as online retail brokers like Charles Schwab Corp. (SCHW), TradeStation Group (TRAD) and OptionsExpress (OXPS).

"I think people just like those potential 10-bagger types of opportunities," Hecht says, quickly adding: "Not that I think E*Trade's a 10-bagger."

Hecht is concerned that losses in E*Trade's mortgage portfolio remain high, even as Donald Layton, E*Trade's Chairman and CEO and a former high-ranking JPMorgan Chase (JPM) executive, is resigning at the end of this year . Hecht has said he believes Layton is taking credit for turning the company around a bit prematurely .