TD Ameritrade Gets Two Price Target Increases

TD Ameritrade Holding Corp. (NASDAQ:AMTD) received two price target increases yesterday despite reporting a mixed bag on the earnings call. Barclays Capital increased their price target from $14 to $16 and JMP Securities from $17 to $19 yet AMTD shares lost 4% yesterday and are up 2% today. So what gives?

Before we get into the numbers, Jim Cramer himself had some comments on TD Ameritrade that should help shareholders feel better about the call:

First, the TD Ameritrade (NASDAQ: AMTD) call showed you what I have been looking for: renewed interest in the stock market by retail people trying to make money off the wild swings and the exchange-traded funds. I am no fan of the ETFs, but I am a fan of new people in the game, and Ameritrade confirmed what I was thinking could be happening: actual interest in stocks at the new lower levels. It's a positive -- not a huge positive, but a positive nonetheless.

TD Ameritrade expects lower earnings this year because of the recession but is taking advantage of its financial strength as people search for ways to invest their money, company officials said Tuesday (4/22). The Masters feel the two price target increases are justified, granted AMTD shares are already at $16, over the next year JMP Securities is probably right on with the $19 target.

More about the quarter, future, and conference call -- The company opened 410,000 new accounts in the first six months of fiscal 2009, which represents the best growth in nine years, said Fred Tomczyk, president and CEO.

Net income declined 29 percent and revenue declined 16 percent in the second quarter, but the Omaha-based company reaffirmed full-year guidance at a range of 90 cents to $1.15 a share. That estimate would be lower than the $1.33 per share earned in fiscal 2008.

The company is doing a better job coordinating its sales and services departments, and it offers a variety of investment channels, including online, branch offices and independent registered advisers, Tomczyk said.

For the first six months of the fiscal year, TD Ameritrade had net income of $316.4 million, or 54 cents a share, compared with $427.5 million, or 72 cents a share, in the same period last year. Revenue fell to $1.13 billion from $1.26 billion.

The nation's economy probably will struggle through 2009, Tomczyk said.

"There are signs it's not getting worse, but it's not healthy," Tomczyk said, adding that he was slightly optimistic about more improvement in 2010.

TD Ameritrade averaged about 325,000 trades per day in the second quarter, the second-best quarter in its history. Stock market volatility and an increasingly experienced client base unafraid to make investment changes helped fuel the trades, Tomczyk said.

The company finished the second quarter with $1.2 billion in cash and cash equivalents, and three credit rating agencies upgraded its credit to investment grade, officials said.

The company completed its stock buyback program in the second quarter by repurchasing about 36 million shares at an average price of $11.88 per share. About 34 million of those shares were purchased from the family of company founder Joe Ricketts, as the Ricketts family seeks to purchase the Chicago Cubs.

The acquisition of thinkorswim GROUP Inc. should be completed by the end of the third quarter, and integration of that company should be completed by December 2010, Tomczyk said.

TD Ameritrade also announced that over the next 12 months it would transition many of its sweep funds into FDIC-insured money market deposit accounts. Sweep funds are clients' money generated by stock or bond sales.

The new accounts would be the sole sweep vehicle for all clients other than top-tier retail clients and independent registered advisers, TD Ameritrade officials said.

The move comes after the Primary Fund, one fund used by TD Ameritrade as a sweep vehicle, dropped in value last September to 97 cents, 3 cents below the targeted $1 a share, then was frozen by fund manager the Reserve of New York.

TD Ameritrade has pledged to help investors who experience any losses in the Primary Fund.

Yields for money market mutual funds dropped, and TD Ameritrade has waived certain fees on those funds to help prevent client losses, company officials said.

SOURCE: http://www.americanchronicle.com/articles/yb/128932997