E*Trade Shares Slump On Heavy Volume
NEW YORK (
) --
E*Trade Financial
(ETFC) - Get Report
shares continued to trade heavily on Tuesday, but the stock ended the day in the red.
E*Trade was by far the most active stock on the Nasdaq exchange Tuesday with in excess of 250 million shares changing hands. The issue's level of activity was more than double that of the second most active stock on the exchange --
Delta Petroleum
( DPTR) at 93 million -- and well ahead of its three-month daily average of 86.6 million. As was the case on Monday, E*Trade was again the second most actively traded U.S.-based stock for the session behind
Citigroup
(C) - Get Report
. E*Trade shares closed at $1.92. down 3.5%, pulling back from a session-high of $2.08.
shares ended Monday up 11%, despite a lack of obvious news. The stock's rise followed a surge on Friday after Goldman Sachs analysts upgraded the stock to a buy rating and lifted a six-month price target to $2.30.
Some investors suggested that the stock's push higher on Monday was a continuation of Friday's positive move. But Monday's price surge came in the afternoon, well after investors had time to digest the Goldman call, which arrived before Friday's opening bell.
Others speculated that perhaps the company was potentially getting ready for a sale to one of its rivals,
TD Ameritrade
(AMTD) - Get Report
or
Charles Schwab
(SCHW) - Get Report
.
E*Trade does have two things going for it -- a recently completed recapitalization plan through debt swaps and an equity offering, in addition to a well-performing brokerage business.
However, BMO Capital Markets analyst Mike Vinciquerra disagrees with the recent optimism around the stock.
"Sentiment on E*Trade has been quite positive, as has stock performance, primarily because the company has enhanced its capital levels and because apparently, some people think the company is suddenly in a position to consider merger offers," Vinciquerra writes in a note Tuesday. "As we've said on multiple occasions, we believe E*Trade
will be
an attractive merger candidate, but we can't see the likely buyers being interested until the credit outlook has improved considerably."
Neither Schwab nor TD Ameritrade "will consider buying E*Trade until its mortgage book has shown significant and lasting improvement and that's unlikely to be until at least midway through 2010 if not later," he adds. "Buying on a takeover possibility might be a good idea 10-12 months from now, but we think it's foolhardy in the near term."
Vinciquerra rates the company at market perform.
Fundamentals aside,
, president and founder of Dion Money Management and a contributor to
TheStreet's
sister Web site
RealMoney
, says that E*Trade is a play for traders, not investors.
"The volume is so high that the stock could make major moves in either direction, and very quickly," he wrote on
RealMoney
. "That said, the churning in the financial undead has been profitable for several weeks, and E*Trade may take out Goldman's price target within the week if the broader market cooperates."
--Written by Laurie Kulikowski in New York.
