E*Trade: Business Has Improved
June 29th, 2009
Last week marked the culmination of a series of events regarding E*Trade (ETFC) that provide clarity for investors on what it will take for E*Trade to execute a successful turnaround:
- E*Trade raised over $600 million in equity from a larger than expected common stock offering at $1.10 a share and an earlier equity purchase program.1
- E*Trade exchanged as much as $1.345 billion in debt for zero coupon bonds that are convertible to stock with Citadel Investment Group2, saving up to $148 million in annual interest expense.3
- E*Trade’s stock declined to the $1.20-$1.30 a share range from the $1.40 to $1.50 range (where it was already an attractive value), representing in my view an outstanding buying opportunity.
These events turn E*Trade into a largely macroeconomic play. E*Trade is clearly executing for reasons I have previously expressed in terms of operations and marketing—and has now shored up its financing to a degree that should allay exaggerated concerns of adverse action by regulating agencies. E*Trade’s brokerage revenue continues to be very favorable and—despite some indication of a mild summer slowdown—its current Alexa.com figures for website traffic continue to be strong. (See my post on How to Make Money in the Stock Market Using Alexa.com.)
