Ameritrade Releases Comprehensive Apple Watch App, Allows Trading On Wearable Device

With the rise of smartphone penetration, casual and non-professional traders have increasingly started using mobile apps to trade stocks. Brokerage firms such as TD Ameritrade (NYSE:AMTD), E*Trade Financial (NASDAQ:ETFC) and Charles Schwab (NYSE:SCHW) have developed their smartphone apps to allow customers to trade, look at market indices and observe market movement on the go. The response from customers has been very positive over the last few years – especially at Ameritrade, which has a trading platform that is ideal for technically sound users. ^[1]

Ameritrade’s trading platform for desktop and mobile not only allows investors to check stock prices and make trades in real time like most other platforms, it also allows users to look up moving averages and trade options while allowing trading of complex futures, options and currencies. In its most recent quarterly earnings, the company reported that 16% of all trades completed on its platform were conducted on its mobile platform. This figure stood at just 3% of total trades back in 2010. The average daily volume of trades during the quarter was down by about 3% compared to the prior year period. Despite the decline, mobile trades were up by 12% on a year-over-year basis. ^[2]

We have a $34 price estimate for Ameritrade’s stock, which is over 10% lower than the current market price. Ameritrade’s stock price has risen by 7-8% since the beginning of the year.

See our full analysis for TD Ameritrade

Other Trading Apps On Wearable Devices

Just hours after the Apple (NASDAQ:AAPL) Watch release date was announced back in March, London based brokerage and spread betting provider IG Group Holdings revealed its app extension for the Apple Watch. ^[3] The IG Group was the first large brokerage to announce an app for a wearable device. Additionally, zero-commission brokerage app Robinhood also introduced its Apple Watch app extension in late April. ^[4] 

Soon afterwards, E*Trade Financial announced the launch of its app for the Apple Watch. ^[5] While E*Trade’s mobile app extension for the Apple Watch doesn’t include the feature to initiate trades, users can look at stock prices, trade volumes, personal portfolios and market indices.

Ameritrade Forays In The Wearable Segment

After witnessing a solid customer response to its mobile trading platform, Ameritrade intends to continue to focus on the mobile segment and enhance its user experience. As a result, the brokerage has now launched a trading app for the Apple Watch. ^[6] The mobile trader app for the Apple Watch will be available in the fall.

While Apple Watch sales currently stand at an estimated 3 million units through the first two months of release, analysts estimate full year shipments to be anywhere from 15 million to 30 million units. ^[7] We currently forecast Apple to ship around 17.5 million Apple Watch units through calendar year 2015. Subsequently we expect this number to rise to over 35 million units through the end of our forecast period.

Although the number of Apple Watches sold are significantly lower than iPhone sales (which are expected to rise from 220 about million in 2015 to over 250 million be the end of the decade), it still provides a solid market opportunity for Ameritrade. The introduction of Robinhood and other similar apps in the market has encouraged large brokerage firms to improve their mobile device offerings and enhance the overall user experience to compete with mobile-only brokerage providers. According to Ameritrade’s estimates, it is currently the leading brokerage firm for mobile trades. The addition of a comprehensive mobile trading on wearable electronics should solidify that position. ^[6]

Ameritrade reported an 11% year-over-year increase in its daily average revenue trades (DARTs) in calendar year 2014. Ameritrade’s DARTs stood at 438,000 trades per day in 2014, which has increased to over 450,000 trades per day in 2015 thus far. ^[8] We expect the DARTs to increase at a CAGR of over 5% through the end of our forecast period.

Introducing the mobile app and extensions for wearable devices is a smart strategic move for brokerage firms because not only is it easier to develop and maintain a mobile app (compared to a website), it also encourages higher engaging time for users. ^[9] If mobile trading continues to rise in the coming years, it could help brokerages post healthier margins. Although the impact of a successful cross-platform mobile app may be limited in the short term (and even lower for an extension of the app for wearable devices), it could be beneficial in the long run. According to our estimates, Ameritrade’s adjusted EBITDA margin through calendar year 2014 stood at 47.2% – almost 2 percentage points higher over the previous year. We forecast Ameritrade’s adjusted EBITDA margin to improve by over a percentage point in the current year to over 48%, and subsequently to over 50% through the end of our forecast period.

View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research

1. Should you trade stocks on your iPhone?, Market Watch, April 2014 [↩]
2. TD Ameritrade Q2 FY 2015 Earnings Call Transcript, Seeking Alpha, April 2015 [↩]
3. IG Group launches first trading app on the Apple Watch, IG Group Press Release, April 2015 [↩]
4. Introducing Robinhood for Apple Watch, Robinhood Blog, April 2015 [↩]
5. With Apple Watch Launch Days Away, E*TRADE Releases Watch App, Finance Magnate, April 2014 [↩]
6. TD Ameritrade Launches Apple Watch App, Ameritrade Press Release, June 2015 [↩] [↩]
7. Here’s How Many Apple Watches Have Been Sold So Far, Time, June 2015 [↩]
8. Ameritrade Monthly Metrics, Ameritrade Investor Relations, June 2015 [↩]
9. 7 reasons why mobile apps are better than mobile websites, Fliplet, April 2015 [↩]