Retail investors are poised to sink more money into the stock market, Ameritrade ( AMTD - Get Report) Chief Executive Joe Moglia hinted Tuesday.

After reporting a 227% leap in net income, Omaha, Neb.-based Ameritrade raised its guidance for the full year, saying there are signs that its first-quarter performance might be sustainable.

"Clients gave us new money this past quarter and ... clients don't bring their money to Ameritrade to park it in cash," Moglia said. "That will be money that will come into the marketplace for actual trading."

Ameritrade's clients have placed $11.5 billion in cash and money market funds, Moglia said, adding that the firm has opened over 21,000 new accounts in the first few weeks of January. "The actions of our clients are suggesting that we are now in the fourth quarter of a legitimate market recovery."

In an interview with TheStreet.com, Moglia said he wouldn't be surprised to see trading activity slow "a little bit" going forward. The company has been processing 250,000 trades per day so far this month, up from 175,000 trades per day in the December quarter. Still, Moglia also said there are signs that activity will remain strong.

Each week, Ameritrade conducts a survey with prospective clients to determine whether investors believe equities are a good, long-term investment. In the latest week, 70% of respondents said yes, compared to just 40% last September. "That's the evidence that we've seen that so far, the pickup is legit," he said.

Ameritrade doesn't disclose which stocks are the most popular among its clients but did note that there has been broad interest in the market in recent months. The National Association of Securities Dealers reported that trading in bulletin-board stocks spiked in September, and the trend seemed to continue into December, but on a conference call Moglia said he "didn't see that specifically."

Analysts cheered Ameritrade's first-quarter results Tuesday and investors sent the stock up 12%, or $1.90, to $17.27. Despite the jump, Moglia said the stock remains "cheap," noting that earnings rose 166% last year and are expected to climb by a minimum of 53% this year.

"If you recognize that we do more equity trades online with retail than any other broker dealer in the entire world and we have the highest operating and pretax margins in the industry, and we're exhibiting incredible growth rates -- there's a valid argument that we're cheap at today's level," he told TheStreet.com.

Earlier this month, Merrill Lynch Colin Clark sliced his rating on Ameritrade, citing valuation concerns.

Ameritrade earned $71.9 million, or 17 cents a share, on net revenue of $226.4 million in its first quarter, compared with $22 million, or 5 cents a share, on net revenue of $180.5 million a year ago. The consensus estimate was 16 cents a share, according to Thomson First Call.

The company said it made more money in the last three quarters than in its cumulative 28-year history. The firm also said its operating margin rose to a record rate of 63% and added 80,000 new accounts.

Ameritrade increased its full-year earnings forecast to 49 cents to 79 cents a share for its fiscal year 2004. The consensus forecast is for 59 cents a share. Analysts said the top end of that range appears to be somewhat optimistic and Moglia noted that the firm would only hit the 79-cent end if trading activity remained as strong as it has been in January.

Moglia was cagey about any interest in TD Waterhouse, a unit of Toronto Dominion Bank ( TD - Get Report), which recently ended talks to merge with E*Trade ( ET).

"As far as Waterhouse is concerned, if we felt that it enhanced the client experience and if we felt that it would be in the best long term interests of our shareholders, we would pursue it aggressively," he said. "If we thought it didn't make sense, we'd back away from that."

The Globe and Mail newspaper had previously reported that talks between Ameritrade and TD Waterhouse broke down over strategy and price.

Shares of E*Trade, which had climbed sharply on news of the possible merger, were down just 2%, or 31 cents, at $14.64. Analysts said the company is solidly positioned as a standalone firm and they gave the firm credit for sticking to its acquisition strategy. "We are at least pleased to see management's discipline in walking away from a deal they couldn't get comfortable with," said Raymond James analyst Michael Vinciquerra.