E*Trade Group Inc. has seen
its stock rise since early October at twice the pace of rival brokers Charles
Schwab and Ameritrade Holding, a tribute to a national advertising campaign
and investor appetite for companies doing business on the Internet.
According to Bloomberg News, since Oct. 8, when the
Nasdaq Composite index hit a 16-month low, E*Trade, the No. 2 online brokerage
after Schwab, is up 130 percent, while Ameritrade is up 66 percent. Schwab is up 62 percent, and the Nasdaq index is up
40 percent in the same period. E*Trade closed last at about $29.19.
Almost all E*Trade’s investors trade online, while only about half of Schwab’s
volume is done electronically. In September, E*Trade began a $100 million,
12-month advertising campaign. Since then, the stock has gained from a surge
in shares of Internet companies and increased stock market trading volume.
“E*Trade’s much more stable than most Internet stocks–they’re actually
doing business, and they can make a profit if they choose by reducing ad
spending,” said Linda Chew, an analyst with New York money manager Corinthian
Bloomberg said Chew placed a “buy” rating on the stock April 23 at 22 9/16,
with a price target of 32 to 33, and said she will revisit the earnings model
to see if she’ll increase that target price.
E*Trade lost $1.3 million, or 3 cents a share, for the fiscal year ended Sept.
30. The company is expected to lose 44 cents a share in fiscal 1999, largely
because of ad spending, and earn 54 cents in 2000, according to 11 analysts
surveyed by First Call Corp.
The rise in E*Trade’s stock is “a response to the tremendous amount of
advertising they’ve been doing,” said James Marks, an analyst with Deutsche
Bank Securities. Ameritrade stock had a similar rise a year earlier, when it started a $50
million ad campaign, Marks said.
Lisa Nash, vice president for customer
management at E*Trade said that “substantially the largest chunk” of the
company’s ad spending dollars are being spent on the Internet.