Merrill Lynch boosted

Ameritrade's

(AMTD) - Get Report

investment rating to buy from neutral Wednesday, saying that even if current trading volume holds steady existing earnings forecasts are conservative.

Shares were recently up 46 cents, or 5.3% at $9.15, according to Instinet.

"We estimate every incremental 10,000 average trades per day could add an additional 5 cents a share in annual EPS upside," analyst Colin Clark said. Clark's current fiscal 2004 EPS estimate of 45 cents assumes average daily volume of about 154,000 trades. If the company can sustain the 179,000 daily trades it averaged in June through 2004, however, he believes EPS upside would be around 12 cents to 13 cents.

Merrill has no banking relationship with Ameritrade.

TheStreet Recommends

Further, Ameritrade's second-quarter trading volume increased 33% sequentially, Clark said, making it "the largest online broker measured by average daily trades, even ahead of

Charles Schwab

(SCH)

." On July 22, Ameritrade

beat analysts' third-quarter estimates by 2 cents and upped its fourth-quarter EPS expectations, in line with analysts' forecast.

On Friday, Ameritrade reports July trading data. Clark expects average volume of 159,000 to 164,000 trades a day, which would be about 3% to 6% above second-quarter levels, he said, but below June levels by 8% to 11%. For the quarter, the analyst sees average daily volume of 149,000 trades because of a slower August, but he believes an EPS upside of 2 cents would be attained if current levels are sustained.

"Ameritrade is the most direct play on a recovery in retail trading and, in a better market environment, we expect it to exhibit faster growth than peers," Clark concluded.