Compass Point Upgrades E*Trade (ETFC) (Update)

Update (9:45 a.m.): Updated with Friday market open information.

NEW YORK (TheStreet) -- Compass Point upgraded E*Trade Financial (ETFC) to "buy" from "neutral" and set a target price of $25 as the company has had strong core brokerage activity and is a potential takeout candidate.

The stock was down 2.57% to $20.50 shortly after the market opened on Friday.

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Separately, TheStreet Ratings team rates E TRADE FINANCIAL CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate E TRADE FINANCIAL CORP (ETFC) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income and expanding profit margins. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 260.00% and other important driving factors, this stock has surged by 115.92% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although ETFC had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 265.7% when compared to the same quarter one year prior, rising from -$28.63 million to $47.43 million.
  • Net operating cash flow has significantly increased by 77.96% to $618.92 million when compared to the same quarter last year. Despite an increase in cash flow of 77.96%, E TRADE FINANCIAL CORP is still growing at a significantly lower rate than the industry average of 460.58%.
  • ETFC, with its decline in revenue, underperformed when compared the industry average of 1.3%. Since the same quarter one year prior, revenues fell by 15.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, E TRADE FINANCIAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.

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