Ameritrade Sustained Solid Growth In November

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AMTD IDEA Group

In continuation with a strong performance across its key metrics in the first 10 months of the year, TD Ameritrade (NASDAQ:AMTD) sustained its growth trend in November. The brokerage’s daily trading volumes grew by nearly 41% year-over-year,. Since the company generates over 40% of its revenue from trading commissions, it needs to sustain this growth in order to compensate for the price cuts in commissions announced earlier in the year. However, the acquisition of Scottrade should offer some respite and help in offsetting price competition.

We have a $40 price estimate for Ameritrade’s stock, which is about 20% below the current market price.

Interest earning assets, which contribute around 50% of the brokerage’s revenues, grew by over 27 % from the previous year’s comparable period. This surge in volumes has likely been driven by both the rate hikes over the past few months and the anticipation of further hikes in the year ahead.

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Ameritrade’s assets under management (AUM) have also continued to grow, and the brokerage’s digital advisory business and focus on newer investment products are likely to drive further AUM growth, and consequently higher investment product fees.

Ameritrade recently announced that it will be offering bitcoin futures contracts on its platform, once they are available in December. With this initiative, the exchange is looking to get an early mover’s advantage in the volatile but fast-growing currency. Fidelity, the biggest brokerage in the U.S., does not currently have plans to offer a similar service in the near term, while other rivals such as Charles Schwab and E-Trade are still looking to test the waters before taking a plunge. This could provide a solid boost to Ameritrade’s trading volumes in the near and long term.

Please refer to our complete analysis for Ameritrade.

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