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TD Ameritrade Rides on Inorganic Growth Efforts, Costs Rise

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TD Ameritrade Holding Corporation’s AMTD top-line strength, focus on high net-worth clients and inorganic growth efforts are anticipated to yield positive results for the stock. Also, relatively higher interest rates are likely to provide stability to the top line. However, rising expenses might impede bottom-line growth.

Nevertheless, the company has been able to gain analysts’ confidence over the past 30 days. The Zacks Consensus Estimate for current-year earnings has been revised 1% upward to $3.01 in the same period. The stock currently carries a Zacks Rank #3 (Hold).

Shares of TD Ameritrade have lost 1.7% so far this year against 15.7% growth of the industry.

TD Ameritrade has been long witnessing double-digit asset growth in net new client assets. Management expects total net new assets to exceed $90 billion in calendar 2019 from $60 billion in 2016. Based on the company’s solid business model, focus on high net-worth clients and improving service model to boost engagement and retention, its top-line growth will likely continue.

TD Ameritrade’s prospects look encouraging, given its inorganic growth activities. With the acquisition of Scottrade Financial Services, the company’s retail business has improved and trading operations strengthened. Further, it invested in a regulated derivatives exchange and clearing organization, ErisX, with an aim to make digital currency products more accessible to retail clients.

TD Ameritrade’s trading volumes have been witnessing an uptrend, mainly benefiting from the volatility in markets. We believe, in the near term, the company will be able to improve trading volumes backed by anticipated improvement in equity markets and its innovative trading platforms.

Nevertheless, TD Ameritrade’s rising operating expenses are a concern. Furthermore, the company’s expense base will likely be under pressure given its ongoing investments in technology and advice and guidance offerings.

Also, even though TD Ameritrade has an impressive capital-deployment plan, its debt/equity ratio is unfavorable compared with the broader industry. Hence, the capital deployment activities might not be sustainable.

Stocks to Consider

Nomura Holdings NMR has been witnessing upward estimate revisions for the past 60 days. Moreover, this Zacks #2 Ranked (Buy) stock has rallied more than 35% year to date. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Piper Jaffray Companies PJC has been witnessing upward estimate revisions for the past 60 days. Further, the company’s shares have gained 20.1% year to date. At present, it carries a Zacks Rank of 2.

TRADEWEB MARKETS TW has been witnessing upward estimate revisions for the past 60 days. Additionally, the stock has jumped 24.5% year to date. It currently carries a Zacks Rank #2.

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TD Ameritrade Holding Corporation (AMTD) : Free Stock Analysis Report
 
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