Ameritrade Falls as Analyst Cuts Forecast

Ameritrade Holding Corp. (Nasdaq:AMTD) dropped 1/4 to 8 9/16 Monday after Robertson Stephens analyst ScottAppleby lowered his revenue forecast for the online brokerage company.

“Based on continued market weakness and the degree to which the market hasfallen, we have become very cautious on the entire e-brokerage sector,” saidAppleby, who continues to rate Ameritrade a buy.

“Following the 1987 decline, it took four years for volumes to recover to1987 levels,” said Appleby in a research note. As a result, he said, revenuefor fiscal 2001 will be about US$627 million, well below the $907 millionpreviously expected.

Appleby also lowered his estimate of Ameritrade’s earnings per share for theyear to 28 cents from 70 cents. Operating income, excluding the company’sonMoney division, is likely to be 28 cents per share, he said.

“Despite our concerns regarding the December quarter, Ameritrade continuesto be the low-cost provider for online brokerage services, and should go onbenefiting from its market positioning,” Appleby wrote. Any improvement inthe stock market should help the company’s shares, he said, as “largebroker-dealers have historically outperformed the Nasdaq following marketcorrections.”

Appleby also lowered his revenue and earnings projections for Ameritraderival Knight Trading Group, Inc. and E*Trade Group, Inc., citing a weak stockmarket. Yet he remained optimistic about the companies, and about the sectorin general.

“While we believe that it is too early to call the end of this correction,we believe that the market is nearing the trough,” Appleby wrote. The nextfour to six weeks could present a “compelling” case for buying onlinebrokerage stocks, he said.

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