Ameritrade Beats the Street

In just the latest sign that online investing is growing rapidly, online broker Ameritrade (Nasdaq: AMTD) calmed Internet investors after the closing bell on Wednesday by announcing record earnings of $8.1 million (US$), or 14 cents per share, in its second quarter of fiscal 1999. The earnings were twice as much as analysts surveyed by First Call expected.

Ameritrade, which lost $300,000 (US$) in the second quarter of 1998, reported net revenues of $63.7 million (US$) for the second quarter of 1999, a 112 percent increase from a year ago, and a 22 percent increase over the first quarter.

“We are very proud of our second quarter results,” said J. Joe Ricketts, chairman and co-CEO of Ameritrade. “The market has been terrific, and we are positioned beautifully to seize the opportunity.”

The good news came after the Nasdaq was pounded on Wednesday, dropping nearly 3 percent. Internet stocks were hit especially hard, with Ameritrade falling 25-1/14 to 148, after seeing a dramatic rise in recent weeks. The earnings report has led to more buying in Ameritrade, with the stock up as high as 188-3/8 in early trading today, although shares soon settled down to around 160.

Ameritrade Opens Accounts at Record Pace

Perhaps more significant is the news that Ameritrade opened a record 82,000 new accounts in the second quarter. Ameritrade now has 428,000 accounts.

Records were also set in trading activity and assets in customer accounts. There were more than 52,000 average trades per day in the second quarter, and customer assets reached $19.5 billion (US$) in March, a 93 percent increase over a year ago.

“The growth in customer numbers is the most important measure of our success,” Ricketts said. “Acquisition cost per new account was $160 for the quarter and now stands at $168 for the first six months. The growth in our customer base provides us with a platform for continued success in the second half of the year.”

Stock Continues Impressive Run

It’s been quite a month for Ameritrade stock. Shares of Ameritrade closed at $62.50 on Friday, April 2. But that following Monday, CS First Boston analyst Bill Burnham reported online trading volume rose 30 to 35 percent from the fourth quarter of 1998. Burnham added that Ameritrade and competitor E*Trade (Nasdaq: EGRP) would report better-than-expected earnings.

Ameritrade climbed 29-1/6 to 91-/58 on that day, and E*Trade rose 11-3/4 to 72-5/8. Both stocks have been on fire ever since. E*Trade, which was up 5-1/8 to 188 in early trading today, is scheduled to report its earnings next Tuesday.