Christopher Allen, who recently joined Compass Point Research & Trading as an analyst, has initiated coverage of four broker/dealers: TD Ameritrade Holding Corp., E*TRADE Financial Corp., Interactive Brokers Group Inc. and Charles Schwab Corp.
TD Ameritrade, which was initiated at a "buy" rating, was named Compass Point's "favorite name in the e-broker space" due to the company's growth potential, positive earnings catalysts and current valuation, Allen wrote in a research report. The online broker is expected to gain from possible revenue synergies and long-term growth opportunities stemming from its recently completed acquisition of Scottrade Financial Services Inc., Allen wrote in a research report.
Among Allen's other favorite e-brokers is E*TRADE, which he initiated at a "buy" rating with a $72 price target.
E*TRADE may be positioned to see mid-teens EPS growth through 2020, assuming that the company continues improving on its underlying fundamentals, sees a positive impact from recent deals and improves its operating margins, among other things, Allen wrote. He set EPS estimates of $3.53 for 2018, $4.10 for 2019 and $4.64 for 2020.
Allen also initiated coverage of Interactive Brokers and Charles Schwab, both of which were started with "neutral" ratings.
While Interactive Brokers enjoys best-in-class account and asset growth, strong profitability and balance sheet, the analyst wrote that its valuation is the primary reason for the "neutral" rating. Allen projects that Interactive Brokers will generate an EPS of $2.34 for the full year of 2018, $2.73 for 2019 and $3.14 for 2020. He initiated coverage of the company with a $74 price target.
Charles Schwab, which was initiated with a $60 price target, has managed to see steady client asset growth, scale benefits and positive rate leverage recently, Allen wrote. However, those factors were already factored into Allen's EPS estimates for the company. Allen's EPS estimates for Charles Schwab are $2.43 for 2018, $2.87 for 2019, $3.20 for 2020.
Allen, who worked at Rosenblatt Securities Inc. from June 2017 through May 11, has been registered with Compass Point since May 17, according to the Financial Industry Regulatory Authority's BrokerCheck website.
