ETFC: Initiate Sell Trade Rating/$37 Price Target

We are initiating a Sell Trade Recommendation on E-Trade (ETFC) with a $37 6-month price target, ~16% downside. (Link)
Three key points to our thesis: 

1. We see risk to the business from potentially lower rates and increased competition from Schwab/Ameritrade and larger financial companies moving into the retail space  specifically around revenues from commissions, net interest margin and payments for order flow; 
2. Contrary to bulls, we think E-Trade’s sub-scale RIA business is unlikely to see meaningful share gains post-Schwab/Ameritrade and we don’t see a likely buyer for the company;
3. Applying the recent 10x trough multiple to the current $3.66 consensus EPS estimate implies a $37 price target.

Originally published on 02/06/19.