NEW YORK (
) -- Volatility is a boon to online brokers and a stormy May is prompting BMO Capital Markets to get incrementally more bullish on shares of
Following a strong performance in April, the firm says its channel checks indicate daily average revenue trades, or DARTs, for May were between flat and up 3% for E*Trade on a sequential basis. The better than expected feedback from the checks along with the broker's strong numbers in April has BMO Capital now modeling for DARTs of roughly 176,700 for the second quarter, up from a prior projection of 156,300.
As a result, the firm not only updated its estimates to reflect the split, but also improved its expectations slightly, going to a loss of 18 cents a share from 2010 from a prior split-adjusted view for a loss of 20 cents a share. For 2011, BMO Capital now sees a profit of 91 cents a share, compared to a previous estimate for earnings of 82 cents a share.
Those views compare to Wall Street's current average estimates for a loss of 31 cents a share in 2010 and earnings of 75 cents a share in 2011, according to
BMO Capital kept intact its market perform rating on E*Trade shares but gave its 12-month price target a plus-10 percent boost to $16 from $14.
"While this valuation is rich, we're making the presumption that E*Trade's earnings power will significantly increase as the credit picture improves," the firm said in a note to clients.
E*Trade shares were off 2.1% to $13.77 in recent trades, deepening their slump in the sessions following its reverse 1-for-10 split taking effect on Wednesday. The stock opened at $14.50 on Wednesday immediately following the split, so it's now down about 5% since then.
Overall, analysts are still taking a wait-and-see attitude toward E*Trade, which is still whittling down bad loans left over from the financial crisis. Of the 14 currently covering the company, eight have the equivalent of hold ratings, five are at buy or strong buy, and one is at underperform.
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--Written by Michael Baron in New York.