E*Trade Goes Bananas on Split

Also, news from Delia's, AOL and an Internet company getting crushed after missing its number.
Author:
Publish date:

SAN FRANCISCO -- Announcement of a stock split has investors in

E*Trade

(EGRP)

doing flips.

Shares of E*Trade are up more than 8 to 55 1/16 in early trading, after the company announced it would split its stock 2-for-1 to shareholders of record Jan. 15. The stock had a rocky ride last week. After announcing that it had signed 500,000 members to its

Destination E*Trade

services site, shares soared to a high of 65 on Dec. 28 before falling in a wave of Internet profit-taking that left EGRP shares around 46 last Thursday.

Nonetheless, the stock is up better than 26 a share in the past two weeks. But despite sharp gains, Stephen Franco, Internet analyst with

Piper Jaffray

in San Francisco, said he sees the split as more of a "neutral event" and not as positive as people are making it out to be. Franco said traders of EGRP are primarily retail investors; indeed, he added, EGRP is one of the top 10 stocks traded by E*Trade users. Without strong institutional support, he expects the stock to sell off, dropping to the mid-20s after the split. Piper Jaffray has not managed any underwriting for E*Trade.

But even more important than news of a split could be E*Trade's earnings report Jan. 11, before the market opens. Franco said stronger-than-expected earnings would bring another round of buying into E*Trade, though just average earnings could provoke some selling. He said the recent run-up in the stock's price has built in expectations of a strong fourth quarter. Earnings expectations are for a loss of 30 cents, according to the 11-analyst estimate from

First Call

.

Franco said conflicting factors will affect the entire technology sector this week, possibly providing for some choppy trade. Profit-taking for tax purposes at the start of the year could weigh on some stocks, though investors typically have more income to spend on stocks from Christmas bonuses. He said he did not have a strong opinion on which factor would prevail as the week plays out.

Other tech stocks in the news today include

America Online

(AOL)

, which is down 4 3/4 in its first day of trading as a member of the

S&P 500

. Franco said it will take a few days for those institutions that need to buy the stock for their portfolios to fill those positions, though some have noted that stocks have a tendency to tank immediately after inclusion in the index. AOL traded as high as 156 on the open.

Delia's

(DLIA)

is back in the news after the company announced it would take its Internet-related unit public. Delia's, a maker of teenage clothing, is up more than 3 at 15 3/8. Its stock more than tripled during the week of Christmas after it announced a marketing agreement with

Yahoo!

(YHOO)

, though profit-taking sent the stock to 12 1/2 last Thursday.

And finally, shares of

Spyglass

(SPYG) - Get Report

are being hurt after the maker of Internet software announced it expects to lose 14 cents to 16 cents a share in its fiscal first quarter compared with the First Call forecast of a 1-cent profit. The company was unable to close a number of transactions during the quarter that it had anticipated. Spyglass is off 5 5/16 at 16 11/16.