Ameritrade (NASDAQ:AMTD) will start streaming free financial research content from online network tastytrade directly through its trading platform. Tastytrade, which started one year ago, is one of the fastest growing online networks, providing seven hours of daily financial commentary analyzing market trends for investors. 
The offering will help Ameritrade expand its clientele of investors, by identifying new market opportunities and investment strategies and will augment the company’s Trade Architect and thinkorswim platforms. Registered investment advisers (RIAs) in particular will pay close interest to the stream as they seek to swim through the prevalent market uncertainty. 
- Ameritrade Q4 Earnings: Asset-Based Income Offset By Decline In Trading Commissions
- Interest Earning Assets To Drive Ameritrade’s Q4 Earnings
- Ameritrade’s Interest Earning Assets Continue Growth Momentum In August
- Ameritrade Sees Continued Growth Across Key Monthly Metrics In July
- Higher Asset Based Revenues Lead To A Profitable June Quarter For Ameritrade
- TD Ameritrade Earnings Preview: Spread-Based Revenues To Drive Results
Down, But Not Out
The alliance with tastytrade will help provide a much needed boost to Ameritrade’s trade activity, which has been sliding for the last few years. Low interest rates have also affected Ameritrade’s earnings through net interest on client balances, which account for more than half of our price estimate. 
We maintain a positive outlook for the company, as improving trade volumes will offset the effect of low interest rates. The company recently reported a 1% monthly increase in Daily Average Revenue Trades (DARTs) for May, 2012. ((Schwab Reports Y/Y Jump in DARTs, Zacks Equity Research, 18th June, 2012) Competitors Charles Schwab (NYSE:SCHW) reported a 9% year-on-year increase in DARTs for May, indicating a positive trend for the industry.
As financial awareness spreads among the American youth (See Ameritrade Banks On Young Parents Driving Growth As Business Recovers), we expect a growth in Ameritrade’s average number of trades per account, illustrated in the graph below. The company will also focus on providing appropriate recommendations to RIAs as an increasing number of financial advisers are seeking guidance on developing business growth models.
We have a price estimate of $20 for Ameritrade’s stock, which is about 20% ahead of the current market price.Notes:
- tastytrade Provides Programming to TD Ameritrade Clients, Press Release, 26th June, 2012 [↩]
- TD Ameritrade Holding Corp. : TD Ameritrade Institutional Advisor Index Survey: RIAs Experience Little Turnover in Staff, Increasingly Look to Hire in the Next Year, 4-traders, 26th June, 2012 [↩]
- Forecasts Hint Fed Might Change Rate Guidance, Wall Street Journal, 26th June, 2012 [↩]