Following the success of its iPhone, BlackBerry and Android smartphone applications, E*TRADE Financial (NASDAQ:ETFC) has launched a mobile application for Windows phone.  E*TRADE Mobile for Windows Phone will allow users to securely trade stocks and options, monitor investment and account information and transfer funds between accounts, on-the-go.
Although the technology is still in the early stages, trades executed through mobile phones already account for 7% of E*TRADE’s overall Daily Average Revenue Trades (DARTs). About half of these trades are executed via the company’s iPhone application. Our price estimate for E*TRADE is $8, 15% below the current market price for the stock.
Like fellow online brokerage firms, Charles Schwab (NYSE:SCHW) and Ameritrade (NYSE:AMTD), E*TRADE’s trading volume has suffered this year due to a steep decline in investor confidence. In the first half of 2012, the company’s DARTs fell 9% over the prior year to 147,747. This trend continued in July as the year-on-year decline in DARTs for the month was around 11%.
Mobile trading however, brought some positive signs for E*TRADE as trades executed through smartphones in the second quarter of 2012 increased by 4% over the prior year. By extending its functionality to Windows phone, the online brokerage firm is hoping to promote this trend to sustain DARTs over the lull period that it is experiencing right now.
Microsoft’s (NASDAQ:MSFT) main mobile partner for the Windows operating system is Nokia (NYSE: NOK). With Samsung (PINK:SSNLF) running into legal trouble and Research in Motion’s (NASDAQ:RIMM) once popular BlackBerry mobile losing ground in the market, the customer base for Windows phone has increased substantially in the U.S. and the rest of the world. With this in mind, E*TRADE’s decision to launch an application to cater to Windows phone users seems to be prudent and will help it capitalize on the market trend encouraging a revival in trading volume.
We expect a short-term increase in DART’s in the fourth quarter of this year, as the cloud of uncertainty surrounding the political inactivity relating to the country’s economic problems is lifted following the general elections in November. In the long-term, we expect trading volumes to gradually increase to about 14 trades per E*TRADE account by 2019. Mobile trades will play a big part in this revival as they allow investors to make knowledgeable decisions on-the-go, while keeping pace with the capricious market.
There is a potential upside of 10% to our price estimate, should the growth rate exceed our expectations, driving the average number of annual trades per E*TRADE account to 20 by the end of our forecast period. You can gauge the effect of a change in forecast on our price estimate by modifying the interactive chart below.Notes:
- E*TRADE Launches Mobile Investing and Banking App for Windows® Phone, Press Release, 18th September, 2012 [↩]